- The Monetary Policy Statement (the “MPS”) was presented by the Governor of the Reserve Bank of Zimbabwe (the “Bank”), Dr. John Mangudya (the “Governor”), on Wednesday, 20th of February 2019.
- In formulating the MPS, the Governor states that the Bank considered the social, legal, financial and accounting implications resulting in the perceived “delay” of about three weeks in the release of the MPS.
What does the MPS say?
The Governor presented several policies that are aimed at bringing about certainty, predictability and functionality to, chiefly, the economy’s foreign exchange market.
Introduction of a new currency and other complimentary directives
- The Bank has, with effect from 25th February 2019, directed all banks to denominate the existing RTGS balances, bond notes and coins in circulation, to a new electronic currency to be called “Real Time Gross Settlement Dollar” (“RTGS$”). The bank advises that the purpose of this new currency is to “establish an exchange rate between the current monetary balances, and foreign currency.” In effect, the RTGS$ joins the basket of currencies that form the multi-currency system in Zimbabwe (i.e. USD, GBP, Euro, ZAR, among others).
- At a follow up Business Forum (“the Forum”) held on the 22nd of February 2019, the Governor explained that the decision to effectively rename the bond notes and coins the “RTGS Dollar” is because 95% (ninety five percent) of the money in circulation in Zimbabwe is on the RTGS platform so the RTGS Dollar is a fiat currency of the RTGS balances.
- On 22nd February 2019, the legal instrument to give effect to this was gazetted as the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Dollars (RTGS Dollars)) Regulations, Statutory Instrument 33 of 2019 (“SI”). The highlights of this Statutory Instrument are as follows:
- introduction of an “RTGS Dollar” which refers to “any funds held as bank deposits under the Real Time Gross Settlement system established in terms of the National Payments System Act (Chapter 24:23);
- insertion of a new Section 44C (Issuance and Legal Tender of RTGS Dollars) into the Reserve Bank of Zimbabwe Act (Chapter 22:15) which permits the Bank, over and above its powers to issue bank notes and coins, to also “have the sole power to issue or cause to be issued electronic currency in Zimbabwe which will be legal tender in Zimbabwe”;
- a directive that the RTGS balances currently expressed in United States Dollars shall, from the effective date of the SI, be deemed to be opening balances in RTGS dollars at par with the United States Dollars. However, the RTGS will not affect or apply in respect of i) funds held in foreign currency designated accounts (Nostro FCA Accounts); or ii) foreign loans and obligations denominated in any foreign currency, which shall continue to be paid in the denominated foreign currency;
- that for accounting and other purposes, all assets and liabilities that are currently valued and expressed in USD shall, from the effective date, be deemed to be values in RTGS dollars at a rate that is 1:1 with the United States Dollar;
- a catch all clause that every enactment in which an amount is expressed in USD shall, from the effective date, be construed as reference to the RTGS dollar, at parity with the USD, that is to say, 1:1 (the parity rate);
- however, that after the effective date any variance from the opening parity rate shall be determined from time to time by the rate at which authorised dealers under the Exchange Control Act exchange the RTGS dollar on a willing-seller willing-buyer basis.
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