Zimbabwe launches new, discounted currency as banks reopen

FILE John Mangudya

FILE John Mangudya

Commercial banks reopened on Friday after a bank holiday, but with exchange facilities from bond notes to U.S. dollars at the same 2.5 rate limited to individual and corporate holders of foreign-currency accounts, queues outside appeared to be no longer than usual.

On Wednesday, Mangudya announced that the government would no longer insist that a quasi-currency known as bond notes and RTGS$, an electronic equivalent, were worth the same as the USA currency.

The bond notes and electronic dollars will be known as a separate currency called RTGS dollars.

Commercial banks reopened on Friday after a bank holiday.

Several foreign exchange traders in the black market spoken to said business was low as the market anticipated how the policy measures by Dr Mangudya would unfold. University of Zimbabwe Economics Department chairperson, Professor Albert Makochekanwa, said the black market rate would ultimately fall should banks be allowed to trade in forex as announced by the central bank.

The black market, however, maintained a two tier rate of the United States dollar to the bond note with Eco-cash transfers pegged at 1:3.8. The move effectively reintroduces a national currency as Zimbabwe's government battles to restore normality to the country's economy. The troubles stem from the country abandoning the Zimbabwe dollar in 2009, after a bout of hyperinflation, in favor of the United States greenback.

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"With consumer prices soaring, significant amounts of multilateral debt arrears, virtually no foreign reserves, and confidence at rock-bottom, Zimbabwe's problems are still far from over - nor is the road ahead any clearer".

"The RTGS dollars thus become part of the multi-currency system in Zimbabwe. You will realise that there is a lot of demand for the United States dollar to carry out various activities", said Dr Kanyenze. "They have through the back door reintroduced the Zimbabwe dollar". "We have seen this before, it will lose value very soon", said James Mawire, a manager at a firm that sells mining equipment.

People queue outside a bank in Harare, Zimbabwe.

Though the RBZ said it had accessed sufficient lines of credit to buttress the exchange market, it provided few details.

"It is too early to tell how this new system will work, but it is an important step in the right direction", said Nick Ndiritu, a money manager at Allan Gray.

"Companies need to boost production, because the floating of the United States dollar alone will not enhance productivity". "You could call it a float".

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