Whether you like to admit this or not, #MondayBlues has bad news for you. The money in your bank account is fake digital currency that has been printed by Reserve Bank Of Zimbabwe RBZ through the Real Time Gross Settlement (RTGS) system to fool you and you will only realize the truth the minute you leave Zimbabwe, that all along you have been using Zimdollar.
Currently, there is so much noise and speculation caused by mistrust of the “yet to be introduced “ bond notes, yet it is undeniably shocking news to learn that the RBZ has been printing electronic Zim dollars for the past two years, under the RTGS, and 90% of Zimbabwean money in circulation is not backed by real US dollar.
This therefore means that, the currency cannot be used for making international payments and can only be used for domestic transactions only. For those who travel abroad, you will see that the master cards and visa cards now have cash and swiping limits which then explains it. If we only have a cash crisis in Zimbabwe how come we are limited on the number of withdrawals outside Zimbabwe where cash is not scarce,? How come there are no limits to swiping in Zimbabwe but the same limits applies when you are swiping outside, they are managing the scarce commodity!
While most analysts , myself included have openly condemned the introduction of Bond notes, it is a sad reality to learn that Zimbabwe has all along been using RTGS “fake”funds, which are not backed by the US dollar, hence technically, we have already been using the Zimbabwe dollar and all the RBZ now needs to do is to support that with physical cash.
While the RBZ can make all sorts of explanations about the biting cash crisis, only few analysts and bankers fully understand why Zimbabwe is in his sorry state and more importantly, everyone at the top knows that we are using “fake” US dollars and bond notes are not different.
Because this is a very complex situation to some one who is not in the finance sector, I will try and use very simple terms to describe the technical issue that has led Zimbabwe to where it is today and the shocking reality that we are already using Zimbabwean dollars, whether we like that or we don’t.
The History of Foreign currency in Zimbabwe.
Zimbabwe is not legally authorized, neither does it have a binding agreement with the United states to use US dollars as their currency due to sanctions and sharp policy difference.
Because of the absence of such an agreement, the RBZ has always been in a fix to try and have cash reserves , to kick off the market and cushion the banking and financial sector in Zimbabwe, but thank goodness they are many other ways of securing cash besides loaning the national reserve.
Our local, international banks have access to foreign funds, donor funds , direct remittances from family friends or NGOs played a major role to fill up our coffers so that the engine can start turning.
How Foreign Currency Accounts Works.
When you receive money directly from any of these sources , this is true real USD currency and it does not land directly into your bank account but it goes into what the banking system calls a nostro account.
A nostro account is simply an original foreign currency account held in another bank that represents your currency, so for Rands , Pulas or Yuan, they are certain foreign banks that actually have this money on behalf of your bank.
The biggest mistake.
Mainly because the RBZ can not directly import cash, our banks mainly had to directly import cash for themselves to serve their customers, and since the introduction of foreign currency in Zimbabwe in 2009, this is how we got cash and every bank took care of its own business and importing of foreign currency to fund their nostro accounts.
Literally, The money is loaded on a plane or security vehicles and sent overseas or regionally for Rands or Pulas to credit their offshore accounts. This process of sending out money to credit a nostro account is known as repatriation.
From this period Zimbabwe started seeing serious depletion of Nostro account balances while ironically the RTGS system was quickly rising.
The RBZ also announced a very controversial policy around early June this year when it said
Caption : Since the inception of the multi currency regime, this local RTGS US dollar currency has been growing each year through private credit creation and most recently through the rampant issuing of TBs, i.e. public credit creation,” the report reads.
However, today the imbalances are too wide for the private sector and investors to ignore the reality of a second currency (RTGS). ‘Hard cash’ in the banking system has shrunk to only 6% of system deposits (US$269mn) from 49% in 2009 (US$582mn). There is now a black market exchange rate for converting US dollars in the RTGS to ‘hard cash’ (1:1.10)
Someone started “taking” our money!
If this money was not stolen then they should simply give us our money because we now need it.the national reserves shows a sharp and alarming decrease of nostro balance which is now standing at 6% as stated above
In October 2008, at the height of the hyperinflation era, former Reserve Bank governor Gideon Gono described the RTGS system as “a vehicle for illicit foreign exchange parallel market dealings that have distorted exchange rates beyond the wildest imagination, and this time around transgressor is in fact the government.
They have put the RBZ under so much pressure forcing them give in so as to keep the country running, just like what Gono did when he tried the bearer cheques.
The government has a huge expenditure bill, they need so much money more than they are making. The country will come to a halt if the nostro accounts remain as they are, but where is our money that was deposited in the nostro accounts.
Remember at a certain time when Biti was the finance minister he said that you can only eat what you have killed.this simply meant lets live within our means without creating artificial money.
What the government has been doing to stay afloat
It is alleged that after the major coffers decline, government had no more money to give the banks because they had used the money for whatever reason and the banks are now dry and can no longer deliver.
Ironically, when that happens, the monetary authority should swoop on the bank, but this time around the RBZ came on hard, defending the banks, meaning they had an interest in the incompetency.
The government had to quickly issue what are called Treasury Bills (TB).
But the government’s problem is that the RTGS cannot fund nostro balances or be used to import cash.
Under proper banking conditions, the RTGS position simply reflects cash held in vaults by RBZ and the nostro balances in RBZ’s accounts held with external banks. If a bank needs nostro funding, it will request the RBZ to credit its nostro account against a reduction in the bank’s RTGS position.
In 2014, The Ministry of Finance said $245 million worth of TBs were issued in the domestic market during the first three months of the year, reflecting government’s huge appetite for cash. Of this amount, $15,9 million went towards financing the budget deficit while $229,1 million went towards debt repayment and other recurrent spending.
“Most of the TBs issued during this period, were to beneficiaries that were owed money by government and therefore upon receiving the TBs, the beneficiaries sold the TBs on the secondary market to local investors at various discount rates. What compounded the depletion of bank nostro account balances was the fact that the cash received from TB sales on the secondary market was almost immediately used to import goods and services, whilst in some cases, the funds were repatriated or externalised by the beneficiaries,” said Zimnat Asset Management in a report titled Banking Sector Cash Crunch for the month of March.‘
A local publication stated that Reserve Bank officials privately estimate the current amount of local debt in the form of TBs are at over $4 billion, most of which is attributable to the Finance Ministry through its Public Debt Management Office. The $4 billion gap is equivalent to the size of the entire 2016 national budget.
So how did government pay for these TB after they matured, they simply used RTGS system to feed the system with digit, after they had initially taken real USD from whomever who bought the TBs.
Analysts say the effect of the TBs avalanche, especially between 2014 and 2015 and the state’s manipulation of the Real Time Gross Settlement (RTGS) is the primary cause of the cash shortage that is presently choking the economy no the externalization lies.
The question is so, Where is our actual USD?What has the government done with our FCA, is this not abuse of trusted property because one should get his money on demand?
This situation is dire to the the extent that government has even failed to settle or close the Telecel Zimbabwe acquisition due to lack of funding