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Zimbabwe introduces RTGS dollar to solve currency problem

February 27, 2019

 

"Nobody knows what it is," is the verdict of Zimbabwe's former trade minister and now opposition politician Nkosana Moyo. 

 

He was talking about what appears to be a new currency in the country. 

It has been introduced over the last few days but its impact is not yet clear. 

 

Why is it needed? 

Zimbabwe has a troubled history with currency. 

 

In 2009 it ditched the Zimbabwe dollar and adopted the US dollar after hyperinflation destroyed its value. At its height prices were almost doubling every day and the reserve bank printed notes worth 100tn Zimbabwe dollars to try and keep up. 

 

But because more US dollars were leaving the country - in the form of payments for exports - than coming in, US dollar cash was in short supply. This led to long bank queues as people struggled to get their money out. 

 

"There is nothing to stop Zimbabwe printing money with this new currency," said Jee-A van der Linde, an analyst at South Africa-based NKC African Economics. "The government has basically kicked the can down the road in recent years by trying to stimulate the economy through excessive spending." 

 

Zimbabwe's currency woes have undermined President Emmerson Mnangagwa's efforts to win back foreign investors who were sidelined under his ousted predecessor, Robert Mugabe. 

 

The last time Zimbabwe had its own currency, a decade ago, Mugabe's government was able to turn on the printing presses to fund higher salaries for government workers, curry favour with the military and pay political opponents - with disastrous economic consequences. 

 

RTGS dollar? 

Zimbabwe's new currency was stuck around 2.5 to the US dollar on Tuesday as tight restrictions on trading and exchanging it remained in place despite a central bank pledge to let the RTGS dollar trade freely. 

 

Zimbabwe abandoned a discredited 1:1 dollar peg for its dollar-surrogate bond notes and electronic dollars last week, merging them into a lower-value transitional currency called the RTGS dollar in an effort to ease chronic cash shortages. 

 

Economists welcomed the move but have urged the government let the RTGS fluctuate as it has promised. 

 

 

Resources: 

https://www.bbc.co.uk/news/world-africa-47361572 

https://www.timeslive.co.za/news/africa/2019-02-25-zimbabwe-struggles-to-convince-doubters-as-it-launches-new-currency/ 

https://www.timeslive.co.za/news/africa/2019-02-26-zimbabwes-new-currency-unmoved-as-transactions-stay-restricted/ 

 

 

 

 

 

 

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