The local surrogate currency, RTGS Dollar (Inclusive of Bond Notes and Coins) is set to expire in September when the Presidential Powers (Temporary Measures) Act, which gives the President Powers to make regulations, expires.
According to business and economic analyst, Victor Bhoroma, Zimbabwe needs to have local currency before the end of September 2019 since the Act that was used to introduce the currency has a six-month lifespan which ends later this year.
“The Zimbabwean government has indicated that the country will be launching new currency before the end of 2019. The announcement has caused some confusion amongst businesses and the transacting public who operated with an understanding that the RTGS Dollar was now the local currency.
“The key question that arises is on the difference between the RTGS Dollar (Inclusive of Bond Notes and Coins) and the upcoming local currency.
“The introduction of the impending currency is largely necessitated by the fact that the legal instrument used to introduce the RTGS Dollar is temporary with a specific timeline of six months from the day of the proclamation by the office of the President. In principle, therefore, Zimbabwe would need to have local currency before the end of September 2019,” Said Bhoroma.
President Emmerson Mnangagwa recently announced that plans are underway to bring back a local currency as the RTGs Dollar has continued to lose value against the greenback.
This sent the RTGs rate tumbling on the black-market which has necessitated an astronomical increase in prices of basic commodities.
Back in 2009, the government was forced to dump the Zimbabwean dollar due to record hyperinflation and economic decline which had wiped off 50% of the economic value. The country adopted the multi-currency regime to stabilize prices.
In November 2016, The Reserve Bank of Zimbabwe introduced the Bond Note as an export incentive scheme at a rate of 1:1 to the US Dollar. Soon after the Bond note introduction, the parallel (black) market found its feet again by exchanging RTGS bank balances with the US dollar at premiums of at least 10-15%.
In March 2019, Zimbabwe gazetted two legal instruments; The Exchange Control Regulations (Amendment) of 2019 (SI 32) and the Presidential Powers (Temporary Measures) for (Amendment) of the RBZ Act and RTGS Electronic Dollars Regulations of 2019 (SI 33).
The statutory instruments meant that the RTGS dollar shall be legal tender in Zimbabwe though they do not prohibit the use of multiple currencies adopted in 2009.
“The main headache for the Central Bank is on how to blend the proposed new currency with RTGS balances that are circulating in the economy while ring-fencing savings and dealing with runaway inflation.
“Excessive government borrowing to plug budget deficits on the local market has been the major driver for money supply growth since 2014,” Bhoroma added.
