Africa: Zimbabwe’s sudden currency reform – a reaction from within
In the news again the Reserve Bank of Zimbabwe has decided that as from 24 June 2019 the Zimbabwe dollar is the sole currency for legal tender purposes.
(through Statutory Instrument (SI) 142 of 2019.
What does this mean?
Well, it’s not as bad as it sounds. Here is an extract from Adventure Zone’s Brent Williamson which gives a clearer outline.
Firstly and as some background, the bond notes and RTGS dollar were said to be at par with the US$ – an assertion which was only true on paper but impractical in reality hence the unchecked rise of a strong black market (read parallel/ illegal market) which pushed up prices of consumer goods (fuel/food etc) and drove the economy into the ground as bad money chased away good money.
For clarity, (SI) 142 of 2019, while re-introducing the Zimbabwe dollar as legal tender, does not preclude or ban or outlaw the use of other international currencies (such as US$, Euro, UK Pound, RSA Rand, Aus $ etc ) in Zimbabwe for settlement of services such as (and especially not) Tourism, customs duty on specific imports etc.
The import of this is that clients can still settle for visas, accommodation, flights, excursions, f&b expenses and any tourism products in the same international currencies as before. Tourism is, in any case, one of the surest ways for the government to receive foreign currency and they are not tempering with its capacity to bring in much needed good money!
(SI) 142 of 2019, is primarily targeted at domestic trade by Zimbabweans patronizing local businesses where the government would like for the Zimbabwe dollar to be the sole legal tender thus preserving the scarce foreign exchange for importation of essentials such as drugs, fuel, technology etc.
The intervention sought by (SI 142 of 2019) is no different in intent to any other economy where the local citizenry uses a local currency for daily internal transactions – refer to RSA, Botswana, UK, USA, Australia etc.
Should one have foreign currency in their possession and wishes to use it for settlement of goods and services, then one has to go to a bank or bureau de change to convert such into the local tender.
Bottom line is that Zimbabwe is still open for business and is working to get up to speed with IMF recommendations.