Well, the Zimbabwean government has now been finally forced to admit what we have known all along: Bond notes are not equal to real US dollars despite what the law says (or used to say). Nor are RTGS balances that now flood our accounts equal to US dollars. We all know that. We have known it for a long time.
Here is another thing we know: the government stole our United States dollars. The ones that were in our accounts and replaced them with RTGS numbers which we already know are not equal to US dollars. In a clandestine act of legal robbery, they transferred numbers picked from thin air and took out billions of USD from banks.
What’s the money situation like right now
At the moment when the latest Monetary Policy was created:
- There are 3 458 175 RTGS dollar accounts
- These have a total of $9.56 billion RTGS dollars in them
- In contrast, there are 133 633 FCA or real USD accounts
- These have about $674 million USD in them
This means FCA accounts constitute only about 7% of the entire money in our banks. This explains why dollarisation is not an option. There simply aren’t enough dollars period.
How the government robbed us?
They actually employed a myriad of methods but we are going to keep it simple. Back in 2009, we had an almost pure money supply. For simplicity’s sake let us assume 100% of the money in banks was USD. The problem was that the Zimbabwean government fresh off from printing money during the 2008 era was hurting.
Their revenue collection efforts were bringing in about $4 billion dollars. Thanks to legacy debts, a bloated civil service, populist activities such as command agriculture and just plain old corruption that $4 billion could not sustain government expenditure to the levels that the ruling government wanted over the years. At some point, they could not even pay civil servants at once.
Faced with such a crisis the government could not print money in the traditional sense as the USD was now the primary currency. They were however in charge of the RTGS system. So they proceeded to send RTGS dollars to for example the bank accounts of civil servants. Whenever these civil servants withdrew money they were taking real dollars deposited by others.
As this continued to happen month after month the ratio of real USD versus RTGS dollars continued to decrease. This created a liquidity and cash crisis. You see RTGS dollars are invisible, you cannot actually touch and carry them around. As these continued to replace real USD there were no longer enough real USDs to meet people’s withdrawals. People were now spending hours in queues as they waited to get their hands on real USD.
Faced with such a crisis the government decided to make real RTGS dollars in the form of bond notes to ease the cash crisis. Pegged at 1:1 with the USD and backed by the ever mysterious African Export-Import Bank loan the bond note appeared. The reason given for us getting bond notes instead of getting the real USD from this bank was that people would externalise real USD while the bond notes could only be used in Zimbabwe.
The facility was supposed to guarantee the value of the bond notes. If I were to guess, I would say if this facility indeed existed, the government went and plundered it too while we were not looking. It’s the reason why the governor did not bother to mention it when he, in essence, devalued the bond note.
The RTGS balances continued to grow and the USD balances to shrink despite the government claiming the two were equal. In fact, the only reason they put up with the charade for so long was because they wanted to expropriate people’s real USD at a favourable rate. The most shocking thing for me was the claim by the RBZ governor at some point, that he didn’t know where the RTGS dollars were coming from. Now that is pretty low even by RBZ standards.
A culture of impunity and opaqueness
Now here we are, poorer and relieved of our USD. The only reason why this is legal is because the Zimbabwean government likes to make laws that will shield it from accountability. It’s the reason why this country continues to rank so lowly on corruption and business indexes. The reason why mega deals are signed but never see the light of day.
Laws are created to shield those in power. The RBZ and most government policies continue to be made in dark alleys away from public scrutiny. Parastatals and their politically connected leaders continue to flout laws with impunity. Most do not even bother to produce audited statements on time as the law requires. They cannot even be bothered to obey the law and produce a Monetary Policy on time as the law requires.
To them, the law is meant for us commoners. In fact, the government has on multiple occasions shown a willingness to use lethal force upon citizens whenever they think said citizens are breaking the law. Say what you will, the government robbed us, there is no denying that now.
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16 comments
Ask yourself, how much US$ did you bring into the country. I personally did not export any goods or services.
Stockholm syndrome. 🙂 🙂
You didn’t answer the question. You just attacked the person asking the question, and that is low. I have the same question, did you bring in any USD since 2008 to date? Lets not be emotional here, lets be honest and objective. How many Zimbabweans, if quantifiable, brought in USD since 2008 to date. There are companies like EcoCash for example, currently one of the biggest on the ZSE, despite their size, 90% if not more of their revenue and growth was a result of non-export related services that did not bring in much USD if at all. So if such an entity grew from non-export services, what of other local firms?
I didn’t answer it because frankly speaking it’s a stupid question. It’s generated by those who want to support and justify what the government did. Why is it a stupid question you ask? Well to begin with it is not even relevant! Let me posit this: a thief comes and steals your car which you bought locally several years ago, you clearly tell the officer this. Then he asks you how many cars have you imported in the last five years. It’s an idiotic question because it’s irrelevant. So you didn’t import it does it mean the thief had a right to steal! Frankly it’s moronic and I am tired of idiots who bring this up constantly. They sound smug and frankly stupid.
Well Garikai this is a well wrote article. Please dont waste your time on people who don’t understand how the world of finance works. Their bank balances have been devalued and have been made more poorer and still they dont see it, By liberalizing the exchange rate means the government is going after all the US$ in the black market and they will cause hyper inflation and make prices of goods sky rocket and then they will catch a wake up call but it will be too late. Thank you for the article
You are barking at the wrong tree.Problem is the government could not control its expenditure and had to print issue TB”s (which increased money supply).And remember too much government debt chokes out the private sector. And of course there is the issue of political instability and the lack of an ease of doing business,which scares off investors and negatively affects your ability to get FDI.And last but not least don’t forget Gresham’s Law; Bad money (Bond note) drives out good money (USD).All this affects the supply and demand of the usd and pushes up the premium and inflation.Governement is to blame..period.
You have a severe case of denial syndrome ,try to read widely,l recommend Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson
Dumbest argument ever
This is irrelevant. Not everyone is an exporter by the way. The fact of the matter is the zim gvt just emptied our accounts and there was nothing we could do about it. Takazvitaura kuti it’s not sustainable, bt madhara acho ane ka I know it all syndrome. Ko what happened to our FCA accounts? N why are we being asked to open new ones? What happened to the USD savings atanga tiinawo? It does not make sense to take my USD savings then wondipa bond at 1:1, only to devalue the currency anyway
Maybe a point of correction on the money situation.
1. There are 3 458 175 RTGS dollar accounts (No these are legally called by banks US$ accounts that the account holders signed for)
2. These have a total of $9.56 billion RTGS dollars in them (No they have 9.56 billion US$ in them, in numbers only. The RTGS is the payment system and still is)
3. In contrast, there are 133 633 FCA or real USD accounts (I would need an independent auditor to believe this figure)
4. These have about $674 million USD in them (same comment as in point 3 above).
With the fractional reserve currency system, there is no need to have any real money (notes and coins) equal to deposits. For instance there are only about US$2 trillion notes and coins in circulation in the world today but the total debt in the USA alone, both government and commercial debt is about US$57 trillion?.
The only time the government steals from us is when they force the banks to write all accounts as RTGS$ accounts, which bank customers should not sign for unless you have a gun to your head which will be many guns for 3 million accounts? For me my US$ account with US$1,000 remains as is and as a number. Since the RTGS $ is the new currency, I will convert my US$ to RTGS at the market rate which I do not know at this stage but which is not 1:1, that is my complete understanding of the great MPS of 20 February 2019? This is going to be between a customer and their bank not with RBZ.
It’s pretty clear, but the real deal is the protection of corruption in this country and this may not end anytime soon
Well said Garikai, we ve been robbed for the 2nd time in our lifetime,@donelcanar try reading Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson you might have a better appreciation on what went wrong in Zimbabwe.
Legally it is not binding, I literally deposited USD for me it to be called RTGS dollars without my consent. There was a promissory here which we are not following up, we slipped somewhere or its the system I guess.
The US government or more specifically president is full of crap, Period!
fcucken thieving sons of bitches they are !!!
….in the middle of all this Mthuli and some pferrists want to go gallivanting to Western Europe for what may I ask? They trounce the nation’s laws and constitution whilst pretending to be both learned and educated but displaying classic vintage feudal stupidity and arrogance at the highest superlative level…who can they fool any more?