'Zimdollar' takes over as US$ disappears

'Zimdollar' takes over as US$ disappears
Published: 12 November 2017 (790 Views)
Real time gross settlement (RTGS) balances, bond notes and treasury bills (TBs) are part of the "local dollars" as they are used solely for local transactions, unlike the greenback, a financial expert has said.

Zimbabwe has been using a multi-currency regime since 2009, which is dominated by the dollar.

The introduction of bond notes last year, which are at par with the US dollar, has expanded the currency basket.

Financial expert Persistence Gwanyanya said in a broad sense, money in Zimbabwe includes cash, bond notes, nostro and RTGS balances.

"I would prefer to call bond notes and RTGS balances the local dollars and United States dollars cash and nostro ba
lances, foreign currency," he said.

"Local dollars can only be used for local transactions and foreign currency for foreign payments."

Gwanyanya said another key distinction factor, which was important to highlight was that while local dollars can be printed, foreign currency cannot.

In Zimbabwe, RTGS transfer balances became popular at the start of 2016 when they were touted as an alternative and part of the central bank's strategy to have a cash-lite society by 2020.

However, while RTGS transfers grew, they also turned into a local currency in that money transacted on that platform rose at an average of 7,37% against declines in cash transactions of 3,54% on a month on month basis.

This was in the eight-month period starting January ending August.

Buttressing this was the fact that the money used for RTGS transfers and deposits as at the end of June was $6,99 billion compared to cash in circulation of $261 million.

Best practice dictates that there should be at least 40 or 50% real cash backing deposits, which in this case was only 3,73% and 12,31% even with the $600 million nostro stabilisation fund.

As such, RTGS balances are not backed by anything yet they accounted for 70% of transactions valued at $27,4 billion in the economy as at June 30.

One of the definitions of a local currency are its uses locally. To that effect, it is currently difficult to process RTGS money outside the country.

Another reason why RTGS balances are now a local currency is the fact that these balances in terms of hard cash in bank vaults largely consist of bond notes at a rate of 3,57 times to every dollar.

With bond notes featuring more in bank vaults, RTGS balances are essentially localised.

Further evidence that RTGS balances are a local currency is the fact that it has a premium on every dollar of 80%.

Stanbic Bank Zimbabwe chief financial officer Solomon Nyanhongo told a recent conference that RTGS balances were a local currency stemming from companies seeking loans against inadequate export generation.

"So the way it is, the local dollar is overvalued and I am sure at one point we are going to be forced to bite the bullet and devalue the amount which we have in this economy in RTGS balances," he said.

Partner and investor in Flocash Zimbabwe, Taurai Chinyamakobvu told the same conference that it was time to accept that the country had a glorified local currency.

"I was in a meeting for a pension fund and we were trying to figure out what to do with preserving the funding," he said.
"What was clear from that conversation and other conversations we had in many places is that from where I stand, it is a myth that we use the United States dollar in Zimbabwe.

"It is important for us to accept that we have a local currency. I do not know what you call it, Zimbabwe dollar, Kwacha, Zola or whatever, but it is a myth that we have United States dollars."

Apart from RTGS balances, the bond note has also become a bona fide local currency since its release last November under the export incentive facility.

The surrogate currency's transition into a local currency started when foreign currency, particularly the greenback, started dropping from the market, resulting in demand for the surrogate currency.

As of June this year, of the $261 million cash in circulation, $204 million was in bond notes and coins and $57 million in foreign currency according to Steward Bank chief financial officer Alfred Chaavure.

Since its introduction, the bond note has lost at least 45% of its value as premiums for the United States dollar using the note is $1,45 to every $1.

- the standard

Tags: rtgs, zimdollar, us$,
 0

You May Like These Videos

Comments

There are no comments.

Latest stories

PDZ bemoans govt's misplaced priorities by giving chiefs expensive cars

by Staff Reporter | 19 January 2018 | 205 Views

Mnangagwa's regional trips are strategic, critical and promotes regional integration

by Tinashe Eric Muzamhindo | 19 January 2018 | 132 Views

'Aliens' face challenges in registering to vote in Zimbabwe

by Stephen Jakes | 19 January 2018 | 91 Views

Roy Bennett 'suffered a lot in his attempt to build a new Zimbabwe'

by Staff reporter | 19 January 2018 | 150 Views

Who is the Representative of God on Earth?

by Tendai Tagarira | 19 January 2018 | 91 Views

Champions at home and abroad gone too soon

by Jacob Mafume | 19 January 2018 | 82 Views

Former deputy minister of education 'Tapela' dies

by Stephen Jakes | 19 January 2018 | 180 Views

WATCH: Mugabe 'forgot' Mnangagwa firing

by BBc | 19 January 2018 | 159 Views

Obert Gutu banned from MDC-T HQ by the Vanguard

by Staff reporter | 19 January 2018 | 143 Views

Mnangagwa's message to Davos

by Staff reporter | 19 January 2018 | 88 Views

MDC must lead by example in leadership transfer - Mliswa

by Stephen Jakes | 19 January 2018 | 105 Views

Heal Zimbabwe riled by increase in human rights violations

by Stephen Jakes | 19 January 2018 | 60 Views

Free and fair elections is a myth

by Zondiwe Gumede | 19 January 2018 | 87 Views

Why women keep out of political participation and activism in Zimbabwe

by Makho Precious Moyo | 19 January 2018 | 72 Views

About Marriage (Part 1)

by Belinda Chowa | 19 January 2018 | 99 Views

MDC must urgently put its house in order

by Justice Benjamin Paradza | 19 January 2018 | 90 Views

MDC mourns the passing of the struggle veteran Roy Bennett

by Stephen Jakes | 19 January 2018 | 146 Views

MDC-T provincial chairpersons exonerate Khupe

by Tererai Danga | 19 January 2018 | 149 Views

Gukurahundi is not a bygone - Zapu

by Stephen Jakes | 19 January 2018 | 110 Views

'Arrest Obert Mpofu or else chaos will reign'

by Staff reporter | 19 January 2018 | 513 Views

Mnangagwa felt sorry for Grace Mugabe

by Staff reporter | 19 January 2018 | 407 Views

Axed Bosso players demand outstanding dues

by Staff reporter | 19 January 2018 | 112 Views

Varsity student shoplifts perfumes

by Staff reporter | 19 January 2018 | 160 Views

Stealing from the dead

by Staff reporter | 19 January 2018 | 108 Views

Bulawayo's Luthuli Dlamini takes City to the world

by Staff reporter | 19 January 2018 | 118 Views

Sex with late uncle's wife torments man

by Staff reporter | 19 January 2018 | 183 Views

Lying ben 10 dumped

by Staff reporter | 19 January 2018 | 114 Views

Mudzingwa opens up on Bosso exit

by Staff reporter | 19 January 2018 | 101 Views

Teacher forces 'lover' pupil to abort

by Staff reporter | 19 January 2018 | 86 Views

Man dumps wife for married girlfriend

by Staff reporter | 19 January 2018 | 160 Views

Baboon attack splits family

by Staff reporter | 19 January 2018 | 91 Views

R10 stabbing sends man to ICU

by Staff reporter | 19 January 2018 | 58 Views

Knives drawn as pastors fight in church

by Staff reporter | 19 January 2018 | 109 Views

Typhoid case in Nkayi linked to Mbare

by Staff reporter | 19 January 2018 | 63 Views

Woman feasts on own blood

by Staff reporter | 19 January 2018 | 77 Views