Other than similar colors, what do cheese and gold have in common? If you live in Zimbabwe the answer is that both are forms of money.
It depends on which end of the economic spectrum you are. If you have even some modest wealth you have likely been using U.S. dollars rather than Zimbabwe’s beleaguered dollar. Inflation in January was at 230 percent. During 2009 it was estimated at one point that inflation had hit an almost unfathomable 79.6 billion percent. In 2008 Zimbabwe issues a Z$100 trillion bank note. It shouldn’t come as a surprise that in January 2009 the African nation announced it was legalizing foreign currencies.
In 1980 Zimbabwe was using coins in denominations of 1, 5, 10, 20, 50 cents and one dollar. This was followed by a Z$2 coin in 1997 and a Z$5 coin in 2001. In June 2005 the Reserve Bank of Zimbabwe announced it was planning to issue Z$5,000 and Z$10,000 coins. Due to inflation the coins were never struck.
As unlikely as might be imagined coins continued to play a significant part of Zimbabwe’s economy despite inflationary pressures. In 2014 the government announced it was importing “Zimbabwe bond coins” in denominations of 1, 5, 10, 20, and 50 cents that would be valued on par with the U.S. equivalent. Bond coins struck at the South African Mint in Pretoria have been available since 2016 and became officially part of the most recent currency series in 2019.
South African 10-, 20-, and 50-cent and 1-, 2-, and 5-rand coins were declared to be legal tender, as were U.S. 1-, 5-, 10-, and 25-cent coins. In March 2015 the U.S. half dollar was made legal tender, this being followed by a special Z$1 bond coin in November 2016.
While Zimbabwe’s bank note denominations continue to spiral out of control even following a reformed Zimbabwe dollar program, the nation moved towards specie rather than fiat money to stabilize the currency system. Zimbabwe began releasing Mosi-oa-Tunya (Smoke that Thunders, a reference to Victoria Falls) gold coins that RBZ Governor Mosi-oa-Tunya has since said, “have proved to be an effective open market instrument for mopping up excess liquidity in the economy.”
Mosi-oa-Tunya coins are serial numbered and can be purchased using domestic Zimbabwe dollars, U.S. dollars, or many other exchangeable foreign currencies. The coins can be traded, converted into local currency, used in commerce, or pledged as security against loans.
Alongside all this fiat and specie money Zimbabwe has adopted the U.S. dollar as legal tender for a five-year period in an effort to stabilize domestic exchange rates. A shortage of dollars has made this arrangement problematic.
Zimbabwe is a nation of haves and have nots. Specie coinage may help the haves, but what about the nearly 40 percent of the population who earn less than Z$1.80 per day? For these people it costs more than $Z900 to convert to a single U.S. dollar. It’s just as ridiculous to expect someone to make change from a Zimbabwe gold coin as you might expect if you were trying to make change in specie (or in fiat money) from a 1/10 Gold American Eagle, our current lowest denomination gold coin.
The cheese doesn’t stand alone. In fact, a slice of cheese is one of the many items now being used in Zimbabwe to make change. According to the March 24 The Wall Street Journal newspaper, “Because of a lack of small change, businesses have started printing their own ‘money’—scraps of paper, sometimes handwritten, that customers can use to pay future purchases. Others are handing out change in-kind, making customers whole with juice boxes, pens, or slices of cheese.”
The South African and U.S. coins could solve at least part of this problem, but it is costly to import them, and local banks have a problem stocking sufficient supplies for the foreign coins to be of much use.
Credit cards and electronic payments are not widely used in Zimbabwe. As for the national bank—NMB. Locals have recently begun to refer to it as being the National Mattress Bank. Call it what you like, it doesn’t look like Zimbabwe’s monetary situation is heading for a soft landing.