Fundamentals not right for new currency

THE MDC notes with regret and surprise the announcement by Reserve Bank of Zimbabwe that it will introduce a new currency next weeks.

MDC communications

This is indeed a shocking development, considering that since 2017, this government has essentially introduced and acknowledged the existence of five currencies.

The first currency was the multi-currency regime that it inherited from the inclusive government. The second currency, introduced by the present regime through an expansionary fiscal policy and the running of huge budget deficits since 2014, was the RTGS$ (Real Transfer Gross System), which essentially was fictitious transactional money that was only recognised locally.

Things would come to a head in December of 2017, when the central bank cemented the existence of the bond note (introduced in 2016) through a Statutory Instrument.

In February of 2019, the government officially introduced a new currency, through SI33/2019 called the RTGS dollar, which was initially pegged at an exchange rate of 1:2,5 against the United States dollar. On June 24, 2019, the government officially jettisoned a regime of multiple-currencies and adopted as the sole legal tender in Zimbabwe, its RTGS dollar, through SI142/2019.

Thus, this year alone, the government has introduced four currency regimes. That is to say the regime of multiple-currency and bond notes that operated before February 20, 2019 based on a parity exchange rate of 1:1.

Secondly, the formal introduction of the RTGS dollar at an exchange rate of 1:2,5.

Thirdly, the official demonetisation of the multiple-currency regime and the retention of the RTGS dollar as the sole currency in Zimbabwe.

Now, yet another currency is to be introduced.

Not only that, on the same day that RBZ governor announced his new currency, the Minister of Finance, at another forum, advised that government was considering the introduction of the rand.

Leave a Reply

Your email address will not be published. Required fields are marked *