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RBZ Governor John Mangudya

Oliver Kazunga Senior Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) has completed the verification of Zimbabwe dollar account balances — paving the way for the demonetisation of the local currency starting end of this month.

Demonetisation entails stripping a currency unit of its status as legal tender.

Through demonetisation, the government aims to create confidence in the financial services sector by assuring the nation that the return of the Zimbabwe dollar is not imminent.

Zimbabwe adopted a multicurrency regime in February 2009 to mitigate the challenges of hyperinflation in the economy.

“We’ve completed the verification of Zimbabwe dollar account balances with the demonetisation of the local currency scheduled to begin at the end of this month,” RBZ Governor John Mangudya told Business Chronicle yesterday.

“Demonetisation entails decommissioning of a national currency as legal tender and to facilitate this process, we’re not only looking at the money that was locked in people’s bank accounts. “But we’re also encouraging the public to come forward with old cash that people are holding in their homes.”

The move buttresses the Central Bank’s monetary policy review statement that Mangudya presented in February this year.

The RBZ boss has said demonetisation is in line with the policy pronouncement made by the Minister of Finance and Economic Development, Patrick Chinamasa in both the 2014 Budget Statement and the Mid-Term Budget Statement.

“The Reserve Bank shall be demonetising the Z$ balances by 30 June 2015. It’s envisaged that $20 million shall be used for this purpose. All genuine or normal bank accounts, other than loan accounts, as at 31 December 2008 will be paid an equal flat amount of $5 per account,” said Mangudya.

“The then prevailing United Nations (UN) exchange rate will be used to convert Z$ balances that were as a result of arbitrage opportunities “burning” and for Z$ cash to be received from the walk-in banking public.”

“The significance of this policy measure is to bring to finality to this long outstanding government obligation to the banking public and to formally pronounce the demise of the local currency.

“This is critical to buttress government’s commitment to the multiple currency system which the government is committed to preserve,” added Mangudya.

After demonetisation of the Zimbabwe dollar, it is hoped that compensation of the account holders whose money was locked in banks when the country adopted a multicurrency system, will begin before the end of the year.

Before the adoption of a multicurrency system, a majority of Zimbabwe dollar account holders had savings whose balances ran into quadrillions or quintillions of dollars.

However, when the government adopted the multiple currency system, the money became worthless and savings went up in smoke.