The RBZ announces interest rates for deposits, it’s too little too late

It’s a well-known fact, the only bank Zimbabweans will trust with their hard-earned money is the National Mattress Bank-NMB. The fact that there is actually a bank called NMB is of course coincidental but still part of the joke. What is not a joke is the suffering we have endured at the hands of Zimbabwe’s Fiscal and Monetary authorities who continue to unleash horrors upon horrors under the guise of fixing the economy. That’s why the government’s latest measures to lure people back into the formal financial system will almost certainly fail again.

Actions have consequences

One side effect of shock tactics preferred by the government has been almost universal mistrust of Zimbabwe’s banking system. No sane business or person will deposit their hard-earned money if they can avoid it. If you are really wondering why here is a recap for you:

• Things started to go horribly wrong at the turn of the new Millenium as political and economic turmoil gripped Zimbabwe. The value of the local dollar plummeted. There were multiple cash shortages before 2005. The government did things like introduce bearer’s cheques and traveller’s cheques which were all supposed to be temporary. Each time the RBZ and the government lied and the temporary currency became permanent.
• The government pulled money out of circulation twice before 2009. Each time this happened the public suffered. During one such operation, Operation Sunrise, people were supposed to exchange their old Zimbabwean bills for the new currency in two weeks. If they had large sums of money it would be confiscated if they failed to explain its source. This was supposed to thwart cash barons instead they bribed their way out of trouble but rural people and the elderly lost their wealth with the snap of a finger.
• Then the good old GNU came. People lost all their pensions, savings and deposits in 2009. The stability of the GNU era seemed to suggest it was all worth it. Banks operated normally for a while and people had to build from scratch.
• Then in 2013, it all went belly up. The government went back to its unfaithful ways of printing the RTGS dollar and in essence pilfering USD out of people’s accounts. Eventually, government apologists started touting the nonsense that only those who deposited USD and exporters were entitled to foreign currency. This incomprehensive nonsense was supposed to justify it but it was a slap to people who had faithfully trusted the system.
• Then in 2018 the government, still claiming USD, RTGS and Bond Notes were on par, ordered that USD and RTGS accounts be separated.
• Months later they recognised that USD and RTGS were not equal and started using a fixed rate which they, in their infinite wisdom pulled out of thin air.
• They also hiked the IMT tax to 2%, putting a chill on electronic transactions
• Then in the middle of 2019 with little warning, they attempted to scrap the multicurrency system and tried to force people to give them their foreign currency at a fixed rate in exchange for ZWL/RTGS.
• Having failed to ban the multicurrency system they restored it again last year under the pretence that it was meant to ease people’s suffering as we were about to go into a lockdown.
• They promised a market-based auction-rate but to this day the hand of the RBZ weighs heavily upon that auction which is governed in such a way that almost guarantees a rate which the authorities deem acceptable.
• Then they unleashed Statutory Instrument 127 of 2021

I probably missed a lot of other such policies along the way but during the multi-decade crisis, Zimbabweans have learnt two things:

• If you can help it, don’t deposit your money. The RBZ has been very liberal with the truth countless times in the past. Who knows one day you wake up and you will be told you cannot withdraw USD again because you are not an exporter. You will be asked to justify why you need to withdraw. You don’t have to tell your matress what you plan to do with your money.
• Always prefer USD to local currency. Not only can the local currency depreciate rapidly with little warning but who knows we have a sudden Operation Sunrise where the government attempts to trap those with ZWL notes. They cannot do the same with USD though as they are not the issuing authority. You can always find someone who wants USD in exchange for goods or service whether it’s in Zimbabwe or elsewhere.

The RBZ is right deposits are essential

For a man with little love for the RBZ and their current track, I bet this is rather surprising but the RBZ is right. A cash USD economy is not exactly conducive for the formal economy as a whole. Be as it may the Bank has itself to blame that it is likely going to fail to convince the transacting public to trust it again.

I mean seriously after all they have done? Besides this interest is nothing but pittance considering the bank charges involved. Even from an investing point of view, what kind of idiot will deposit their money so they can earn 1% interest per year and then get charged 2% to move it? You are better off buying Dogecoin or Bitcoin then. The deposit terms the RBZ is offering are all risk and little reward.

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Finance Minister Mthuli Ncube said that the government had a budget surplus of ZWL$9.8 billion in Q1 2021. Now, that’s just over US$100 million (by the RBZ auction rate) and that’s a lot of money. So we discussed what a budget surplus is, if it is a good or bad thing in the Zimbabwean context, and how the government could possibly use all that money.