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US$ for old Zim bank notes

Zimbabweans will soon be asked to surrender their Zimbabwe dollar notes to the Reserve Bank of Zimbabwe in exchange for United States dollars as part of a demonetisation exercise to bring finality to issues of local currency holdings.

RBZ Governor Dr John Mangudya talks to Finance Minister Patrick Chinamasa
RBZ Governor Dr John Mangudya talks to Finance Minister Patrick Chinamasa

Although RBZ Governor John Mangudya was unavailable for comment at the time of going to print, sources said the exercise was certain to start shortly.

During phase one of the exercise, people with denominations of between ZW$5 and ZW$500 will be paid at US dollar exchange rates of up to US$2.

The rate for ZW$5 will be US$0,02, ZW$10 (US$0,08), ZW$20 ($0,08), ZW$50 (US$0,20), ZW100 ($40c) and ZW$500 at $2.

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The $1 note will not be part of the demonetisation process.

The second phase will involve demonetisation of notes issued in 2008 ranging from ZW$10 trillion to ZW$100 trillion, to be paid for at the US dollar exchange rate of up to US$0,40.

The ZW$10 trillion will fetch US$0,02, ZW$20 trillion ($0,04), ZW$50 trillion ($0,2) and ZW$100 trillion will be offset at a rate of US$0,40.

According to RBZ sources, notes issued in the same year ranging between ZW$10,000 and ZW$50 billion are not part of the exercise.

“The bank (RBZ) had on Monday sent public posters to participating banks with details and a list of notes to be demonetised, but this has been delayed after it emerged that the Statutory Instrument to give effect to the process was yet to be gazetted,” said a source.

The withdrawn public posters were meant for a public awareness campaign.

The process will be carried out in phases involving the last sets of denominations issued in 2008 and 2009 to walk-in customers and bank account balances as at December 31, 2008.

Zimbabwe adopted the multi-currency system in February 2009 as a result of spiralling inflation.

“An announcement will be made soon and people holding notes listed for demonetisation will be advised to visit designated financial institutions,” said the source.

It is expected that the decommissioning of the Zimbabwe dollar will put to rest speculation that the government plans to bring back the local currency clandestinely.

Demonestisation is also expected to boost confidence in the banking sector. The move is also seen as progressive as it takes account of unbanked Zimbabweans.

The government has said the return of the Zimbabwe dollar can only be considered when key economic fundamentals such as productivity in key sectors have been achieved.

Timelines previously given by the central bank set completion of the demonetisation process as the 30th of this month.

In 2009, the RBZ slashed 12 zeroes from the local currency as hyperinflation eroded its buying power, which at the last official count stood at 231 percent in June 2008.

The removal of the zeroes resulted in ZW$1 trillion becoming one Zim dollar.

Transactions had also become difficult, particularly dispensing of the notes from Automated Teller Machines.

Banks will not be allowed to exchange Zimbabwe dollars in their clients’ accounts for United States dollars.

The RBZ is set to pay a minimum of $5 to all bank account holders regardless of whether the account had money or not on December 31, 2008.

After paying the $5 to the account holders, the central bank will then apply the prevailing United Nations exchange rate thereafter.

Finance and Economic Development Minister Patrick Chinamasa has since indicated that the demonetisation exercise will cost $20 million.

Zimbabwe now uses a basket of currencies, namely the US dollar, South Africa Rand, Botswana Pula, British Pound, Euro, Chinese Yuan, Japanese Yen and the Australian dollar. The Herald