In tentative rollout, Zimbabwe banks start trading new currency

Source: In tentative rollout, Zimbabwe banks start trading new currency | Reuters

HARARE (Reuters) – Zimbabwe’s commercial banks started trading the RTGS dollar on Monday, but authorities offered no indication as to how ordinary citizens would interact with the country’s new transitional currency five days after it was introduced.

Zimbabwe ditched a dollar peg for its surrogate bond notes and electronic dollars on Wednesday, merging them into the RTGS dollar in an effort to revive a crippled economy and address a cash crunch that has undermined President Emmerson Mnangagwa’s efforts attract foreign investment.

The central bank sold U.S. dollars to banks at 2.5 RTGS dollars on Friday morning, and on Monday lenders began trading the currency with corporate customers and on an interbank market.

There had been indications that ordinary Zimbabweans would be able to buy U.S. dollars with bond notes or electronic dollars from Monday.

But a Standard Chartered bank teller in Harare said her branch was not selling dollars to individuals yet, and downtown bank queues were no longer than normal as people made their way to work.

Kudakwashe Mukora, an electrician who had just come out of the branch, said: “At the moment we’re just shooting in the dark. The government isn’t addressing the fundamental issue which is that the black market is in charge.”

On Monday one U.S. dollar was being sold on the black market for four electronic dollars – which have been locked in individuals’ accounts for months due to the chronic cash shortages – compared to 4.20 on Friday, currency traders said.

An employee at a Stanbic branch said the bank was offering U.S. dollars to corporate clients at 2.5625 RTGS dollars and buying dollars at 2.4 RTGS. She said the idea was that individuals would be able to buy and sell dollars at a later date, but she wasn’t sure when.

The central bank has promised a “managed float” of the RTGS – which stands for the real-time gross settlement system banks use to transfer money – but it is not clear how it will control the currency’s movements given that it does not have significant foreign exchange reserves.

“The big players are holding onto their money, that is what is holding rates at the moment. In the next week or two, it should be clear whether the interbank is working or not,” one trader at Harare’s Eastgate shopping centre said.

Zimbabwe’s currency problems date back to the hyperinflation era of post-independence leader Robert Mugabe, who Mnangagwa replaced after an army coup in November 2017.

International attitudes to Mnangagwa’s government have hardened since a violent security crackdown last summer on post-election protests and on demonstrations last month against a major fuel hike.