Zimbabwe’s central bank, known for spectacular u-turns has once again flip-flopped on policy. A circular sent out in the last few minutes declares that Zimbabweans can once again use the United States Dollar as legal tender;
The circular claims that this will make it “easier for the transacting public to conduct business during this difficult period”.
Reading the statement, what instantly comes to mind is the fact that Mthuli Ncube remarked that “good money drives away bad money” not so long ago;
The problem he referred to back in September 2018 still exists so it will be interesting to see how the US$ supply will fare this time around.
Even more interesting is the fact that the RBZ has fixed the exchange rate again, this time to
1:1 1:25. Whilst the fixed exchange rate failed spectacularly the last time it was effected maybe the existence of a global epidemic will see it fare better this time around – at least that’s what the RBZ seems to be suggesting here.
Reintroduction of a fixed exchange rate is also a u-turn from the Central Bank’s position announced two weeks when they declared on the 11th of March that the new Interbank Market Exchange Platform would “allow foreign exchange to be traded freely amongst the banks and permit a true market exchange rate to be determined.” To hell with all of that they’ve said today.
Where will the money come from?
The biggest question you are left asking is where the US$ will come from. We stopped using it because it was in short supply and everyone was trying their best to externalise it or keep it as far away from local financial institutions as possible and not much has changed.
If anything local currency has become much less attractive than it was when the US$ was banned so it will be interesting to see how all of this unfolds. Personally, I don’t expect much good to come from this…