Finance Minister, Mthuli Ncube has given us another reason to feel unsettled by saying that Zimbabwe will have a “new, fully-fledged currency” in 12 month’s time. He said this during an interview with Bloomberg in which he was talking about how he plans to stabilise the economy by introducing a reference rate to guide the country’s monetary policy. Here’s the Bloomberg report:
Zimbabwe will “soon” introduce a central bank reference rate as part of measures the southern African nation’s government wants to use to prop up the collapsing economy, its finance minister said.
Having a reference rate will help the country manage monetary policy, Mthuli Ncube said in an interview Thursday on Bloomberg Television. The nation also plans to introduce a new, fully fledged currency in the next 12 months and to close the gap between the rate for dollars in the official and parallel markets using RTGS dollars, which the government introduced in February, he said.
I admit that I (and many people I guess) totally missed it when I concluded that the devaluation of bond notes/coins/RTGS effectively made it/them Zim’s new currency. In February, the RBZ made a daring move of abandoning the 1:1 pegging of US Dollars and bond notes/coins/RTGS. The central bank not only devalued the bond notes/coins/RTGS but it also redenominated them to RTGS dollars. Judging by this, I thought it made the RTGS dollars the de facto currency since people can now trade them with other currencies at market-determined exchange rates (just like normal currencies do) but no it’s not Zim’s new official currency as Professor Ncube pointed out.
The probems of a new, fully-fledged currency
When this conversation of having our own “new, fully-fledged currency” start’s, the question of whether or not Zim has (enough) reserves to back a new currency is usually raised. Even Former finance minister, Tendai Biti questioned the sanity of RBZ to introduce a new currency when it doesn’t have any reserves to back it.
Even if we somehow have the reserves, there’s also a question of what the will be done with at least 9 billion worth of electronic money (RTGS balances) that’s in circulation. Will the government just demonetise the electronic money or it will convert it into the new Zim currency? If it demonetises the electronic money, there will be in a national mourning as people’s saving will vanish and if it converts the electronic money into Zim currency there is a risk that it will probably cause monetary inflation. Parish the speculation, let’s wait for the October Monetary Policy Statement to see what the RBZ has in store for us.
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I think the RTGS dollar is a currency, the statutory instrument introducing it made it clear. What I suspect a new fully fledged currency will do away with the multi currency regime officially and it is likely to be a matter of renaming the RTGS dollar to a Zim dollar and printing of notes and coins in the name of the new currency. Local pricing and settlement will be in this renamed RTGS dollar. No more dual pricing, it will be illegal to charge for local goods and services in US$. Just like the RTGS dollar, the exchange rate will be determined by things like interest rates, confidence, the current account on balance of payments, economic growth and relative inflation rates, speculation etc. https://www.economicshelp.org/macroeconomics/exchangerate/factors-influencing/. Disclaimer, I am no economist, so my understanding may be wrong, so feel free to do your own research and/or consult with real economists.
Yes darling I think you are right
zvakangofanana taprara nenzara
let us wait and see guys
Nothing is going to work for Zimbabwe we have been there currencies being changed everyday but that will not stop inflation
Nothing is going to work for Zimbabwe we have been there currencies being changed everyday but that will not stop inflation
Helmholtz
If a country is economically productive it is in a position to defend its currency. The world will not exchange for money from a badly
and corruptly mismanaged economy.
12 months from when?
This has been on for a while
Indicated in statement as October. Hopefully of 2019.
This is beer Hall policy Ncube is just clueless as zanu pf and things will get worse than before
Beer Hall policy Ncube is getting more clueless
We hope for the best
What does Mthulisi think, swimming in a shark infested pool? It’ll never work cos them ZANU sharks will shoot every logical idea you come up with…get out before you discredit your academic credentials! This country needs Divine intervention at this stage. Only God and prayer can solve the problems we have
Things will only work once a legally elected government is in power. For now please just forget. You can not go against the will of the peopl and claim victory. The voice of the people is the voice of God. It is not possible to rig the economy. You can cheat via the ballot box/paper but not with the economy.God save Zimbabwe.