Zimbabwe: Finance Act No 2. is a half-baked measure to configure the value of the Zim Dollar!
The act of Finance Act No 2. was gazetted today on the 21st August 2019. What is weird to be is the two following codes or sections, this being the 22 and 23, which is countering each other. I am finding this as financial voodoo with the currencies. As this act is initially making the RTGS Dollar and Zimbabwe Dollars equal. Combined with the enacted value of the RTGS Dollar, the same as the US Dollar. Which by all accounts are impossible, as the exchange rate isn’t that static, neither followed by law. Unless, the state plans to infuse cash-flow and beat the rates between the RTGS Dollar and the US Dollar.
Alas, the madness, continues with the legislation gazetted today. I will show the two parts of the legislation, before addressing it a bit more. Under the sections itself.
“22 Issuance and legal tender of RTGS dollars, savings, transitional matters and validation (1)Subject to section 5, for the purposes of section 44C of the principal Act, the Minister shall be deemed to have prescribed the following with effect from the first effective date—
(a) that the Reserve Bank has, with effect from the first effective date, issued an electronic currency called the RTGS dollar; and
(b) that Real Time Gross Settlement system balances expressed in the United States dollar (other than those referred to in section 44C(2) of the principal Act), immediately before the first effective date, shall from the first effective date be deemed to be opening balances in RTGS dollars at par with the United States dollar; and
(c) that such currency shall be legal tender within Zimbabwe from the first effective date; and
(d) that, for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the first effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall on the first effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar” (Finance (No. 2) ACT, 2019).
“23 Zimbabwe dollar to be the sole currency for legal tender purposes from second effective date
(1) For the avoidance of doubt, but subject to subsection (4), it is declared that with effect from the second effective date, the British pound, United States dollar, South African rand, Botswana pula and any other foreign currency whatsoever are no longer legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.
(2) Accordingly, the Zimbabwe dollar shall, with effect from the second effective date, but subject to subsection (4), be the sole legal tender in Zimbabwe in all transactions.
(3) For the avoidance of doubt it is declared that, from the second effective date—
(a) references to the Zimbabwe dollar are coterminous with references to the following and to no other forms of legal tender or currency— (i) the bond notes and coins referred to in section 44B of the principal Act; and (ii) the electronic currency prescribed for the purposes of section 44C of the principal Act, that is to say to the RTGS dollar;
(b) the above mentioned bond notes and RTGS dollars are at par with the Zimbabwe dollar on and after the second effective date, that is to say each bond note unit and each RTGS dollar is equivalent to a Zimbabwe dollar, and each hundredth part of a bond note unit and each hundredth part of a RTGS dollar is equivalent to a Zimbabwean cent” (Finance (No. 2) ACT, 2019).
Because, this is the continuation of the hectic balances and switching of currencies. That they are declaring foreign currencies as illegal tenders in Zimbabwe. Is to be expected, as they are getting a new currency or revamping a dead one. Still, the ZANU-PF should have ensured it better.
As they have had temporary measures like Bond-Notes and RTGS Dollars, which they are still infusing into the Zimbabwe Dollars, as a measure, where the ones who paid more than one-to-one with USD. Will lose funds and within that system, the state will initially shave-off funds from the public as they are transferring to RTGS Dollars or even Zim Dollars.
Combined with that shortfall in the public, as the inflation is still on the rise. The add-ons of financial distress will continue, as the state is still using half-measures to contain the economy, with the values and laws around the RTGS, instead of going all in with the Zimbabwe Dollars. They are in this and makes the mash-up between the RTGS/Bond-Notes and Zimbabwe Dollars. All of these three currencies are supposed to be equal and in tandem.
That will confuse and make it messy, as the electronic, the half-measured bond-notes and the revamped Zim Dollar are supposed to change the economy. This financial instrument is supposed to be the key to the troubles the economy is in.
I just don’t see it, I see it as a hectic abstract transaction system used to be able to fix and configure funds, by jumping between the three and taking more funds out of it while the public is losing on the various currencies. This is all made by the state and they are initially doing this to their own. Instead of thinking out one path to beat the hurdle, they are instead making it three. While, they still proclaiming Zim Dollar as the only one, but opening up to continue the two others.
Which is a sophisticated way of ensuring the state to get the Forex or exchange between them. As you have to exchange or pay in one form, the one set as the standard or the Zim Dollar, meaning, if you planning to move the RTGS Dollar to pay for something, that has to be transferred into Zim Dollar.
Financial voodoo and the public will suffer, because the state isn’t cleaning the slate, but trying to patch up wounds with yet another half-baked measure. Peace.