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Rocky start as new Zimbabwe currency hits the market

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HARARE – Most banks in Zimbabwe were not selling US dollars to individuals holding RTGS (real-time gross settlement) dollars on the first day of trading, with numerous bank employees saying it simply does not make business sense.

Last week the Reserve Bank of Zimbabwe (RBZ) cut the bond note loose from the US dollar. The rate between the two currencies was previously fixed at 1:1.

Following the announcement, the official starting exchange rate prescribed by the central clearing house stood at $1 to 2.5 RTGS dollars, with the hope that market forces would dictate the most appropriate exchange rate.

RBZ governor Dr John Mangudya said in a statement that the two currencies would maintain the same value and only differ when using one to buy the other – something that the public found confusing.

“People should not get confused. In the bank, the RTGS balances have the same value with the US dollar, but when one wants forex at the bank, then it changes and its value is determined by the rate prevailing at that particular bank,” he said.

“We have not devalued the RTGS balances, but allowed people to access the forex at a rate which is competitive and allows the economy to grow.”

A casual walk-in by reporters at various banks yielded no success in buying the dollar, which is sold according to a “willing seller, willing buyer” approach.

“We haven’t started selling any money. We have money for nostro account holders but there is no direct instruction to sell to people like you. All that we are doing is helping account holders to pay for goods and services in hard currencies. So what you have to do is bring an invoice quoted in US dollars and then we pay on your behalf,” a banker at one of the country’s leading commercial banks told TimesLIVE.

Before the annual Monetary Policy Statement last week, banks had only been facilitating account holders to pay school fees in foreign countries using the 1:1 rate. With wealthy Zimbabweans sending their children to universities in countries such as South Africa, China, Dubai and the UK, the new rate makes it far more expensive for them.

Had banks made the currency available to ordinary buyers at 1:2.5, one could simply resell that money on the black market – where the rate stood at 1:4 by the close of business – to make a 60% profit.

Branches of money transfer company Western Union around Zimbabwe are currently characterised by long queues. Western Union had been one of the last remaining outlets where people could get money in US dollars sent to them from the diaspora.

“We haven’t had money in a week. Please try next week,” said a Western Union teller this week.

In 2018, Zimbabweans received an estimated $1.85bn in remittances. Most of this money did not enter formal banking channels, however, as illegal forex dealers set up outside international money transfer branches offered competitive bond-note rates instead.

The Zimbabwean government last year gazetted a law to curb illegal cash and forex trading, with offenders facing a mandatory 10-year jail term. By December, 478 arrests had been made – but no notable convictions have been made.

In the country’s second largest city of Bulawayo, an area known as the “World Trade Centre” for the amount of money that changes hands has been barricaded.

Police in both civilian clothes and uniform have been deployed about 100m from the area where forex dealers have set up a new base. When dealers see a car approaching them, they communicate in sign language to alert one another about their willingness to deal, despite the police presence.