LONDON — Banks in Zimbabwe have started trading the new RTGS dollars, but nobody seems to be quite sure how ordinary citizens are supposed to deal with the new transitional currency introduced in South Africa’s neighbour. President Emmerson Mnangagwa introduced the RTGS dollars in an effort to revive his crippled economy and deal with the country’s lack of cash. The Central bank is selling US dollars to banks at 2.5 RTGS dollars, but some of the banks indicated they are not selling them to the public yet; they are only available to corporate clients and an interbank market. Former Finance Minister Tendai Biti has told the Financial Times that it amounted to ‘grand theft’ as no market or reserves existed in Zimbabwe. – Linda van Tilburg
By Thulasizwe Sithole
It was under former Finance Minister Tendai Biti, who was briefly in a unity government led by Robert Mugabe in 2009 that Zimbabwe adopted the US dollar to curb the country’s hyperinflation. Mr Biti also managed to cut the country’s debt but when Zanu-PF regained exclusive power, the government again started issuing dollars without any backing to pay Zimbabwe’s bills which resulted in a repeat of the deterioration of state finances.
In an interview with the Financial Times Mr Biti described the currency reforms announced by the Central bank last week as “voodoo economics” as there was no confidence in the market and the country lacked reserves and he warned that Zimbabweans “have seen this before.” The central bank however claims it has sufficient credit lines to back up the stability of the new currency.
Mr Biti said what is needed in Zimbabwe to re-establish trust, is fiscal reforms as Zimbabweans placed no trust in electronic money. And the figures of the central bank in Zimbabwe back up this claim as it is estimated that a meagre 4% of the 3.2m bank accounts contained more than $1,000.
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The Present Minister of Finance, Mthuli Ncube wants to impose a levy on the electronic transfer of money and says he wants to restore “fiscal stability, including ceasing use of a government overdraft at the central bank to finance spending.” There will be subsidised access to dollars for fuel and other critical imports, but critics say the system has been used for political patronage. Mr Biti says in the past this exemption was a chief vehicle for corruption as the Zanu-PF elite would manage to obtain dollars at a cheap price from the Reserve Bank.”
Some economists and businesses have however welcomed the floating of the new currency as it brings “some sanity after extreme distortions caused by the peg.” Many businesses who ran out of dollars to pay for imports had to close down, food prices shot up and there was no fuel at the pumps.
Zimbabwe economist, John Robertson says is may be a good start and believes that businesses would be able to plan more effectively and that prices will eventually stabilise, but added that the country had “a long way to go.”
Mr Biti’s Movement for Democratic Change was one of the political opposition parties that experienced a heavy crackdown after the recent social unrest. He is currently appealing against a conviction by a Zimbabwean court of “falsely declaring that his party leader was the real winner of last year’s elections” which was won by Emmerson Mnangagwa. Biti says his prosecution and sentence was politically motivated.
