Reserve Bank of Zimbabwe governor, John Mangudya, says the government has had to do away with the 1:1 valuation for bond notes against the US dollar. Photo: Reuters

HARARE – Zimbabwe has floated its quasi-bond note currency, effectively devaluing the unit in what experts say is in preparation of a local currency through slow erosion of bloated bank balances that have driven Zimbabwe’s official inflation to above 50 percent.

Reserve Bank of Zimbabwe governor, John Mangudya, on Wednesday said in a 2019 Monetary Policy Statement that the government has had to do away with the 1:1 valuation for bond notes against the US dollar. After amalgamating the bond notes and electronic bank balances that also include mobile money, Zimbabwe has now denominated its quasi local units as RTGS dollars.

Economics expert, Tapiwa Mashakada, who is also secretary for economics in Zimbabwe’s main opposition, MDC Alliance, said the monetary policy had “de-dollarised cleverly” with the greenback, which has been in use as legal tender in Zimbabwe since 2009, becoming a “foreign currency” unit.

“Zimbabwe now has a sovereign currency called RTGS dollars which is a euphemism for Zim Dollars. The domestic currency has bounced back,” said Mashakada in response after Mangudya’s monetary policy.

The Zimbabwean central bank chief said “after taking account of the implications and putting in place safeguards to maintain stability in the fares market, the Bank is, with immediate effect, establishing an inter-bank foreign exchange market in Zimbabwe to formalise the trading of RTGS balances and bond notes with US dollars” and other currencies.

This will be undertaken on a willing-buyer, willing-seller basis through banks and bureaus de changes.

The central bank will now authorise bureau de changes to purchase foreign currency without limits but shall be limited to sell foreign currency for small transactions up to a maximum aggregate daily limit of US$10 000 (R139 000) per bureau de change.

“This is essential in order to bring sanity in the foreign currency market whilst at the same time promoting exports, diaspora remittances and investments for the good of our national economy,” added Mangudya.

Other experts said the implication of this is that the bond notes have been devalued and will now trade at the same parallel market rate which is between 1:3 and 1:4 against the US dollar.

The government, which is pushing austerity measures, is hoping to contain rampaging inflation by floating the bond unit. Finance Minister Mthuli Ncube has said that Zimbabwe, which frequently battles to settle crucial forex obligations, will introduce its own currency – which was abandoned in 2009 after record hyper-inflation –  later this year.