Surrender of Old Currency Instils Confidence in Sickly Economy – Analysts

By Sij Ncube  

HARARE, June 19, 2015 – CASH-STRAPPED citizens have started trooping to banks to surrender the old Zimbabwe dollar rendered useless at the adoption of the multiple currency regime in February 2009, a development analysts say is part of attempts by President Robert Mugabe’s administration to instil confidence in the comatose economy.

While others sought to convert their trillion-dollar accounts trapped in banks for nearly seven years, others trudged into financial institutions laden with sacks of the old currency.

Economic commentators and analysts canvassed by Radio VOP are adamant Mugabe’s equally cash-strapped administration also seeks to maintain stability in the financial sectors as well as ally fears of the much-taunted return of the Zimbabwe dollar to prop-up the sickly economy.

Zimbabweans have up to the end of September 2015 to exchange the old currency in an monetisation project in which the government has set aside $20 million to mop up Zimbabwean dollar notes and to compensate customers who had local currency bank balances before March 31, 2009.

Bank accounts with balances of up to 175 quadrillion Zimbabwean dollars – that’s 175,000,000,000,000,000 – are being paid $5 while those with higher balances are getting a rate of $1 to 35 quadrillion Zimbabwean dollars.

“A brother of mine went to convert his Standard Bank ZW$ account into cash. His ZW$35 trillion became US$10,” said Descent Collins Bajila.

Edwin Ndlovu, a Pumula South resident and opposition politician, said he had 1 quintillion in his business account but got $45, 30.

But Nontokozo Tshili, an account holder, believes the development is a strategy by banks to motivate old clients as some financial institutions are said to be facing a flight of depositors due to the prevailing harsh economic climate.  

Analysts say while the exchange rate being offered does not bring higher financial incentives, it nonetheless instils confidence in the economy as well as assure potential investors that the Zimbabwe dollar is not coming back anytime soon.

John Mushayavanhu, a local banker and former president of the Bankers Association of Zimbabwe, said the mopping up of the old currency is a most welcome development as it inspired confidence to potential investors.

“People want closure to the Zimbabwe dollar chapter and this is confirmation we are not going back to the Zimbabwe dollar so the market is excited about it. Bank balances are also being converted into US dollar using the same exchange rate and so once this is done come September, it will put closure to the Zimbabwe dollar era,” said Mushayavanhu.

Prosper Chitambara, an economist with the Labour and Economic Development Institute of Zimbabwe, concurred it is a positive development for the struggling economy.

“It (surrender of the old currency) restores some modicum of confidence in the economy. A number of Zimbabweans and potential investors were a bit apprehensive about the possibility of the return of the Zimbabwe dollar,” said Chitambara.

“So this process is a confirmation by the government that the multiple currency regime is here to stay for the foreseeable future,” he said.   

Since Mugabe’s controversial win in the July 2013 elections, speculation has been rife he would bring back the Zimbabwe dollar in desperate attempts to revive the comatose economy, particularly in the wake of massive job losses due to company closures blamed on lack of capital to replace aged equipment, among a myriad of problems bedevilling the country’s industries.

In the meantime Ndlovu’s $45, 30 exchanged for 1 quintillion is enough to buy him and his family 10 kilogrammes of economy beef.