Home » Industry » Mangudya Exorcises Zimdollar Ghost

RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya has succeeded where his predecessor faltered: removing the Zimbabwean dollar and safeguarding the six-year-old multicurrency regime.

Since the replacement of the local unit by the multi-currency regime through the Finance (No.2) Act of 2009, the Zimbabwean dollar had remained in the system, fuelling speculation that it would be revived.

Last week, Mangudya announced that the local unit would be demonetised starting tomorrow under a programme that runs up to September 30. The programme is supported by a $20 million fund to be used to exchange the Zimdollar, with the central bank chief insisting that the process was not compensation but “housekeeping”.

Under the demonetisation process, bank account holders with balances of up to Z$175 quadrillion would be paid a flat $5.

Account holders with balances above Z$175 quadrillion would be paid the equivalent value after applying the UN exchange rate of $1 per Z$35 quadrillion or $1: Z$35 000 (revalued).

Mangudya said for walk-in customers, banks would exchange the Zimdollar at an exchange rate of Z$250 trillion per $1 for 2008 note series and for Z$250:$1 for 2009 notes.

He said the demonetisation process was to safeguard the integrity of the multiple currency system and critical “policy consistency and for enhancing consumer and business confidence”.

Analysts say demonetisation helps in boosting confidence in the multicurrency regime, adding that the “re-introduction of a new currency will not be a simple process”.

“However, RBZ needs to educate people about the demonetisation process to deal with the misconceptions and misinformation associated with Zimdollar,” a bank economist said, adding that government needs to continuously assure people that the multicurrency regime will remain for a long period.

The existence of the Zimdollar had caused headaches for the ministry of Finance with some policy makers calling for its return.

Former Finance minister Tendai Biti spent the better time of his reign dispelling rumours that the local unit would come back.

“Maybe I should commit suicide for some people to believe me when I say the Zimbabwe dollar is not coming back,” Biti told a mining indaba in 2009.

Since 2009, there have been calls to revive the local unit. Former RBZ governor Gideon Gono said the country could introduce a gold backed currency, cautioning that it was not a return to the printing press.

“… what I am calling for is the guarded reintroduction of the Zimbabwe dollar where such a new currency will be fully backed by credible, tangible and locally available assets, such as gold, diamonds or platinum, among several other possibilities,” said Gono soon after the introduction of the multiple currency regime in 2009.

Some four years later, President Robert Mugabe called for the return of a gold-backed Zimdollar saying the US$ had brought misery especially to the rural folk.

“We will get to a point that we shall say no, we need to get back our Zimbabwean dollar. We shall do that and strengthen our dollar. We can strengthen it through gold if we have the gold that is kept at the Reserve Bank of Zimbabwe,” Mugabe said at the launch of the Zanu PF election manifesto.

“We shall mine a lot of gold that we have in the country so that it gives value to the Zimbabwean dollar so that it can be equivalent to the American dollar. One ounce of gold is over a thousand, just one ounce.”

Recently two Zanu PF legislators wanted to move a motion in Parliament for the return of the local unit due to the negative impact on industry of a g United States dollar against Zimbabwe’s main regional trading partner currencies.

Mberengwa East MP Makhosini Hlongwane was supposed to move the motion, supported by Buhera West legislator Oliver Mandipaka.

“We are concerned by the absence of Zimbabwe’s own local currency to drive economic growth and to protect the domestic industry, especially the manufacturing industry, and worried by the loss of jobs attributable to the strength of the US dollar against regional trading partner currencies,” the notice of the motion read.

Last week’s events effectively killed the prospects of such motions.

The use of the multi-currency regime is credited with stemming hyperinflation that officially reached 231 million percent although independent economists estimated the figure to be double.

Zimdollar leaves bitter memories: it was under the Zimdollar era that quintillion, quadrillion and sextillion became the buzzwords. It was under the Zimdollar era that Zimbabweans endured long bank queues, had to “burn” cash and money changers became the big boys in town.

Source : Zimbabwe Standard