Panic as US Dollar Notes Disappear in Zimbabwe

by **Ponee** Sun Oct 02, 2016 7:24 pm

Zim cash crises begins ahead of official launch of controversial money

Zimbabwe Bond Notes are just by the corner as small US notes,$2 and $5 denominations, secretly and steadily vanish ahead of the official launch of virtual currency that has been described by many as a lot worse than toilet paper.

An investigation by the Financial Gazette shows that there is already an invisible hand mopping up all small denominations or rather swapping them for the soon to be introduced Bond Notes.

Zimbabwe’s new currency will start with $2 and $5 denominations by end of October, then $10 and $20 denominations before $50, $100 and other crazy numbers will soon follow.

Denford Mutashu, president of the Confederation of Zimbabwe Retailers, said the level of cash handled by retailers had generally gone down.

“The usage of smaller denominations as change in the retail industry is now also an issue. We are trying to investigate why their levels have declined,” he said. Mutashu said they had observed that people were “avoiding banking cash because the many times they have to withdraw it is costing them in terms of bank charges”.“Even other electronic payment platforms are now discouraging people from bringing cash into the formal system because they are failing to give people cash on demand,” Mutashu said.

No comment could be immediately obtained from the RBZ and the Bankers’ Association of Zimbabwe by the time of going to print.While the bond notes were initially said to be part of a US$200 million incentive for exports, the RBZ has now indicated that the bond notes would now be widely available, with suggestions that these may be printed to support Treasury which is battling to pay salaries.

Critics and the public fear this will inevitably mark the return of the dreaded Zimbabwe dollar, which was abandoned after the country lurched into an uncontrollable hyperinflationary crisis that battered the value of the domestic currency.The local currency’s final days in circulation were marked by anarchy after being hammered by hyperinflation that reached a record 500 billion percent in 2008, wiping out life-savings and impoverishing an entire population.

The US$2 and US$5 notes whose equivalent bonds notes denominations the central bank plans to unveil next month that are disappearing from circulation.Although Zimbabwe has experienced a shortage of bank notes that had been largely blamed on externalisation of high value physical notes, it has turned out much of the cash now in circulation within the banking sector had no backing of real US dollar currency, as it was being generated by government through the real time gross settlement system (RTGS) and Treasury Bills.

Therefore, no physical notes could be imported to back this phony cash, which only existed on the virtual banking platforms.This then triggered the shortage of notes, which resulted in tight withdrawal limits and long queues at banks as depositors sought to withdraw their money.The dwindling of smaller US dollar notes denominations, does not suggest externalisation, but a possibility that a third force may be mopping them out of circulation to abet the planned introduction of bond notes.

The possibility of externalising US$2 and US$5 notes is remote, considering that most of these small denomination notes have been circulating while torn, damaged, badly soiled and dirty.Analysts said they suspected that authorities may be planning to leave very little options for people who would be forced to either accept the bond notes or resort to the electronic payment system through current cash shortages.They said even the shortage of high value US dollar bank notes was meant to leave people with very limited options.

Economist, Trust Chikohora, said the country was headed for a major crisis and the disappearing US dollar bills were indicative of a system failure.“I cannot comment more on the disappearance of some ranges of notes, but I think it is linked to the problem we now have with the RTGS where we just have balances in our accounts, but there is no real cash to back the balances,” Chikohora said.Chikohora also noted that the country’s cash crisis was so deep that the outlook was bleaker.

It seems Zimbabwe people are fully aware there is no money in banks, even if one’s account has $10000, it means nothing since you can not use that to buy a car in Japan’.

This is what a person by the name BIG had to say on a social forum:

Does this imply a possibility that the US$ balances in our bank accounts
are now virtual money that cannot even be used to make an online
purchase via master card, visa etc? For example, does this imply that if
one has a balance of $3000 in his local bank account, it may not be easy
simply wiring say $2200 to an online car seller say in Japan to
purchase an ex Jap car via master card or visa or telegraphic transfer?
Would MasterCard for example turn the transaction down because money in
Zimbabwean banks is now virtual money with no hard cash backing???

https://zimnews.net/zimbabwe-money-crises-starts/

by **Kevind53** Sun Oct 02, 2016 8:46 pm

After they launch the Bond Notes, they still are going to have a shortage. No one wants the bond notes, understandably so given Zimbabwe's history with their own currency.

Panic as US Dollar Notes Disappear in Zimbabwe

Panic as US Dollar Notes Disappear in Zimbabwe

Zim cash crises begins ahead of official launch of controversial money

Re: Panic as US Dollar Notes Disappear in Zimbabwe