RTGS dollar

The RTGS dollar or RTG (Zimdollar[1] or zollar[2]) was the only official currency in Zimbabwe from June 2019 until March 2020, when foreign currency was again allowed.[3] The RTGS dollar was introduced on 21 February 2019 as part of the February 2019 Monetary Policy that was enacted by the Governor of the Reserve Bank of Zimbabwe, John Mangudya.[4][5] The currency was made up of bond coins, bond notes and RTGS balances.[6] The original bond notes were introduced in 2016 to ease US Dollar cash shortages at the time. They were renamed RTGS dollars in 2019, and in June 2019 became the only legal currency in Zimbabwe, replacing the multi-currency system.[7]

On 29 October 2019, when inflation on the RTGS dollar had reached over 300%, the central bank announced a "new" currency to be introduced in mid-November 2019.[8][9] The "new" currency initially traded alongside the RTGS dollar, and was similarly valued, although it did not have the same backing as the RTGS dollar.[9][10] Basically the "new" currency "Zimdollars" was still the same bond notes.[11]

When inflation did not abate, and with the black market continuing to drive the exchange rates for foreign currencies, the Reserve Bank of Zimbabwe introduced weekly auctions of foreign currencies at the end of June 2020.[12] This, combined with other prudent fiscal and monetary actions by the government, such as eliminating budget deficits, stabilized the Zimdollar.[12]

PurposesEdit

The purposes of the currency are the same as other currencies, including:

However, the core purpose of the RTGS dollar was to address some of the economic and financial challenges faced by the Zimbabwe, especially the relative lack of foreign currency held by the government,[7] but officially including:

  • normalise the foreign currency market
  • promote diaspora remittances
  • protect foreign investors
  • promote exports
  • promote locals from pricing of goods in foreign currency only

ValueEdit

Officially the rate of the RTGS$ to the US$ was originally set at 1 US$ equaled 2.50 RTGS$ (1 RTGS$ = .40 US$), but this was not the case on the open markets where the value fluctuated in the first half of 2019 between US$1 = 7 RTGS$ and US$1 = 13 RTGS$.[14][15][16][17] By March 2020, an attempt was made to peg the so-called Zimdollar at US$1 = 25 RTGS$,[18] but inflation continued and this effort was abandoned.[19][20]

Annual inflation in the period ending July 2020 was 837.53% as reported by ZIMSTAT.[21]

The exchange rate is determined by the forces of supply and demand on an auction market the Reserve Bank of Zimbabwe set up along with the announcement of the RTGS dollar. The market is called Interbank Foreign Currency Exchange Market and is made up of banks and Bureau de change.[22]

A new weekly auction of foreign currency was set up in late June 2020 by the Reserve Bank of Zimbabwe to attempt to curb the rampant inflation which had driven the Zimdollar down to US$1 = 80 Zimdollars.[12]

Other currenciesEdit

When the RTGS Dollar was introduced in February 2019, Zimbabweans used a mix of foreign currencies including the US dollar, the South African rand, and the Chinese yuan.[23] In June 2019 the use of foreign currencies in local transactions was prohibited as part of the prospective plan for a new national currency.[7] However, inflation and other factors created a dearth of actual bills, and the US dollar was again authorized for local use in March 2020.[3] The government has said that the authorization to use US dollars in local transactions is just temporary,[24] but by June 2020, some Zimbabwean civil service personnel were already demanding payment of their salaries in US dollars, due to hyperinflation in the Zimdollar.[19]

ReferencesEdit

  1. ^ Muronzi, Chris (3 July 2019). "Hyperinflation trauma: Zimbabweans' uneasy new dollar". Al Jazeera.
  2. ^ "Zimbabwe struggles to keep its fledgling currency alive". The Economist. 23 May 2019.
  3. ^ a b Matiashe, Faral (15 April 2020). "Zimbabwe is on lockdown, but money-changers are still busy". Al Jazeera. Archived from the original on 16 April 2020.
  4. ^ Chaparadza, Alvine (1 October 2018). "Banks Given Two Weeks To Separate Nostro US Dollar Accounts And Local RTGS/Bond Accounts". Techzim. Retrieved 6 May 2019.
  5. ^ "Does Zimbabwe have a new currency?". 26 February 2019. Retrieved 6 May 2019.
  6. ^ Reporter, Staff (20 February 2019). "RBZ introduces "RTGS Dollars"". The Zimbabwe Mail. Retrieved 6 May 2019.
  7. ^ a b c "Why Zimbabwe has banned foreign currencies". BBC News. 26 June 2019.
  8. ^ Nyoka, Shingai (29 October 2019). "Zimbabwe to roll out new bank notes". BBC News.
  9. ^ a b Muronzi, Chris (29 October 2019). "Zimbabwe is getting another 'new' currency". Al Jazeera. Archived from the original on 30 October 2019.
  10. ^ "Is it a new currency or new notes? What does this mean?". Zimbabwe: Market Watch. 1 November 2019. Archived from the original on 3 November 2019.
  11. ^ "New Zimdollar notes: Streets know no data". Zimbabwe Independent. March 2020. Archived from the original on 9 June 2020.
  12. ^ a b c "Zimdollar moves towards stability". Herald. 19 August 2020. Archived from the original on 20 August 2020.
  13. ^ "Monetary Policy Statement: Establishment of an Inter-bank Foreign Exchange Market to Restore Competitiveness" (PDF). Reserve Bank of Zimbabwe. Retrieved 6 May 2019.
  14. ^ Stoddard, Ed (1 July 2019). "Zimbabwe takes a big gamble in its bid to dump the greenback". Business Maverick. Archived from the original on 3 July 2019.
  15. ^ Zwinoira, Tatira (22 March 2019). "RTGS$ weakens 16% in first month". NewsDay. Zimbabwe. Archived from the original on 23 March 2019.
  16. ^ "RTGS dollar plunges by 140%". NewsDay. Zimbabwe. 12 June 2019. Archived from the original on 13 June 2019.
  17. ^ Latham, Brian (4 June 2019). "Zimbabwe's Quasi-Currency Continues on Its Precipitous Slide". Bloomberg. Archived from the original on 4 September 2019.
  18. ^ Stoddard, Ed (30 March 2020). "Zimbabwe brings back US dollar peg for fictional currency". The Daily Maverick. Archived from the original on 31 March 2020.
  19. ^ a b Ndlovu, Ray (14 July 2020). "Zimbabwe Steps Closer to Hyperinflation With 737.3% Annual Rate". Bloomberg. Archived from the original on 14 July 2020.
  20. ^ "Zimbabwe's worst economic crisis in more than a decade". The Economist. 11 July 2020.
  21. ^ https://rbz.co.zw/
  22. ^ "Zimbabwe's RTGS dollars explained | IOL Business Report". www.iol.co.za. Retrieved 6 May 2019.
  23. ^ Hungwe, Brian (6 February 2014). "Zimbabwe's multi-currency confusion". BBC News Online. Retrieved 5 September 2016.
  24. ^ "Zimbabwe to start phasing out use of US dollars at the end of 2022". Polity. Creamer Media. 16 April 2020. Archived from the original on 19 April 2020.

External linksEdit