Bond notes and bond coins were introduced in 2014 and since then they have lived 5 lives compared to the 9 lives cats are proverbial for. Without further ado, lets trace the incredible journey they have made thus far.
Bond coins as change
After multicurrency system everything was good currency-wise . We were in paradise. We were using the South African rand and US dollars for our day-to-day transactions.
However, there was a minor problem of shortages of change. When one bought stuff they were given things like sweets as change because we didn’t have the smallest denominations of multiple foreign currencies we used. That’s when the government found a backdoor to introduce Bond coins.
On 18 December Bond coins got into circulation “to buttress the multiple currency system through the provision of change”.
Bond notes as export incentive
Bond coins didn’t really change the currency market, particularly the informal currency market (black market) which was virtually dormant those days.
But two years later, on 16 November 2016 the government made a fatal mistake of introducing Bond notes. The bond notes were introduced on the pretext that they acted as an export incentive. That meant exporters and remittance receivers were given Bond notes (and coins) for every foreign currency they generated. As the government put it, ” it increased exports” and simultaneously increased forex generation for the country.
But the export incentive also increased the bond notes and coins in circulation. And since Bond notes was not real money, Gresham’s law kicked in: Bad money drives out good money. Money changers (the informal currency market/black market) entered business.
You may ask why Bond notes gave life to the black market and not the bond coins. The thing is bond notes are paper and they are easy to trade rather than trade coins. Are you cool with swapping USD $100 with bond coins worth $200? Nope. But with Bond notes that’s a no brainer, you can accept.
And again, the ever increasing supply of bond notes (which some say was beyond the quantity that was promised by the government) fueled the black market- so more bad money was taking over and pushing out good money.
Bond notes and coins as now electronic money ( RTGS)
Fast forward to 2018 and after the controversial elections, the Reserve bank separated real money( US dollars) from fake money (bond notes, coins and RTGS balances) in the form of Nostro Foreign Currency Accounts and RTGS Accounts.
By definition, RTGS stands for Real Time Gross Money which is an electronic form of funds transfer where the transmission takes place on a real time basis. But here we were calling coins and papers electronic money.
Bond notes and and coins as RTGS dollars- the unofficial currency
Enter February 2019, an epiphany comes down on the government to make it realize that bond notes and coins are not at par with the US dollar. It abandons the fixed exchange rate of 1:1 and leaves the invisible hand to determine the rate of exchange between the two currencies. That time we wrote that:
…..the way the RTGS dollars are being treated on the currency market overwhelmingly suggest that RTGS dollars are Zimbabwe’s new currency. So officially RTGS dollars are not Zimbabwe’s new currency but unofficially they are our new currency.
Bond notes as the official currency
After the President had given us a heads up that we are going to have a new currency in some months, we woke up on Monday with a new currency- the RTGS dollars was dressed in new clothes that made it the new official currency called Zimbabwe Dollars. That effectively ended the multicurrency system as the Zim dollar was made the sole legal tender of the land. We hope this is the final stop.
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5 comments
If a mechanic tinkers around with yo car several times without success, then u shld realize that he is not up to the technical challenges at hand… Same with our RBZ Governor n Minister of Finance, never mind all their paper qualifications…
Very true. This atrocious duo should go back to wherever they got their paper qualifications from and ask to go through a practicals course. If my mechanic messed around with my car the way these guys have messed around with our money he would be fired by the next morning. Anyway we are soon to be very poor trillionares again.
What is the real value of the new Zimbabwe Dollar?
By my understanding it is pretty worthless, it does not matter how many Zimbabwe dollars you have in your pocket, as you as you cross the border out of Zimbabwe you cannot exchange it for anything, there is no bank, no bureau de change, or any other financial provider outside Zimbabwe that will change the Zimbabwe Dollar for another currency and very few inside Zimbabwe.
No retailers outside Zimbabwe will accept an RTGS payment of Zimbabwe Dollars, and just because you have Zimbabwe Dollars in your bank account in Zimbabwe it does not mean that you have the ability to pay any retailer outside Zimbabwe, so what is the value of the Zimbabwe Dollar?
I see a lot of comments comparing Zimbabwe to other countries, people saying that in other countries you cannot use any currency and you have to change your foreign currency into their local currency, well if I were to take South African Rands to England, or British Pounds to America, or American Dollars to Australia, or Australian Dollars to South Africa, in every single on of those scenarios I would have absolutely no problem walking into a bank and changing that money into the local currency of the country I am in.
Please clarify for me, if I were to go to South Africa, England, Australia, China, Korea, America, Brazil or any other country on this planet, in which country would I be able to exchange my Zimbabwe Dollars into their local currency?
I cannot exchange a Zimbabwe Dollar outside the borders of Zimbabwe, I cannot pay a supplier, or make a purchase outside Zimbabwe with a Zimbabwe Dollar regardless of a rate be it parallel or interbank, so what is the value of a Zimbabwe Dollar?
Yes let us ban foreign currency trading in the country and force the people to use a currency that not even our closest allies would change for us in their banks, let us run around with pockets full of worthless paper and pretend it will give us prosperity one day and we struggle and suffer while the people printing the money fly around the world in private jets and live extravagant lavish lives.
The Zimbabwe Dollar is just a name which is trading as RTGS/Bond/EcoCash, all of which are of no value in and outside Zimbabwe. They are just barter instruments which is why they are given queer names? They effectively do not buy capital to use in production. Only when you see a piece of paper written Zimbabwe Dollar with unique security features then you can talk about a Zimbabwean dollar. It is all smoke screen to milk foreign currency from those generating it under the guise of looking after the vulnerable. The politicians, lawyers and bankers are in this scam together, which has resulted in Zimbabwe not being credit rated, not even below junk status, it does not exist in the world of investments. Only the mischievous say the RTGS/EcoCash is the strongest currency in SADC?
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