Economist Lauds RBZ For Introducing A New Currency, The RTGS Dollar

The Reserve Bank of Zimbabwe Governor John Mangudya on Wednesday introduced a new currency, the RTGS Dollar.

Mangudya revealed that the country has abandoned the 1:1 ratio between bond notes and US dollars, a rate maintained by the central bank for nearly three years. He said:

We say that the RTGS dollars are composed of RTGS balances, bond note and bond coins and are in the basket of currencies which Zimbabweans are using.

Ashok Chakravati, a local economist had this to say:

It’s a request that has been in the works for many months by companies. It is a sign that this is a listening government and also a listening central bank.

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Another economic commentator, Neville Mandimika from Rand Merchant Bank said a local currency was indeed needed though the timing may not be appropriate. He said:

The critical issue here is on how it’s introduced. There are various steps that must be followed to ensure that the currency will be accepted as a store of value.

Of these, the most important is ensuring that the economy has adequate forex reserves, which will act as a shock absorber. At this stage, the reserves simply aren’t there to justify its reintroduction.

Timeslive report summaries the major highlights of the Monetary Policy Statement as follows:

• effective 25 February, depositors will be able to move US dollars locally between banks under the interbank system;
• essential imports such as fuel and electricity will continue to have forex allocated by the Forex Allocation Committee;
• gold producers will keep 55% of their earnings in foreign currency;
• tobacco and cotton growers will receive 30% of their earnings from crop sales in foreign currency.
• Tobacco merchants will have 80% of their earnings in foreign currency;
• All forex holdings will be liquidated within 30 days at the market rate for the day; and
• a legal instrument will be gazetted that allows for the use of RTGS dollars and all entities, including government and individuals, will recognise the new currency.

More: TimesLive