Banks will start issuing the South African rand and seven other currencies on July 1, 2016 and will process Real Time Gross Settlements using that regime from tomorrow (Monday).
Other currencies are the Chinese yuan, euro, British pound, Botswana pula, Australian dollar, Indian rupee and Japanese yen, whose use is being promoted to end US dollar cash shortages. The United States dollar remains in circulation, with US$10 million being imported weekly, while plastic money use is being advocated aggressively.
Financial institutions are preparing for the change following meetings with the Reserve Bank of Zimbabwe, and a June 30 ultimatum for all Government departments to embrace multiple currencies has been set. State departments handle the bulk of transactions in the economy, consuming up to 60 percent of money exchange.
Last week, banking sector officials were optimistic the coming dispensation would end cash shortages that began in April on the back of illicit financial flows, a huge trade deficit and the lack of a savings culture.
In an interview with The Sunday Mail, RBZ Governor Dr John Mangudya said: “Following the directive by Treasury for Government departments to activate usage of multiple currencies by June 30, it is now necessary for banks to also give out multiple currencies to people in order to support this initiative.
“We expect that the banks will start issuing multiple currencies, especially if a customer requests to receive any money in the currency of their choice, within the multi-currency basket.
“This is not a directive that we have given, but we expect there will be increased use of multiple currencies in the economy and, naturally, banks will take measures to support this policy.
“Last week, we managed to hold test-runs on activating Real Time Gross Settlement payments. The tests were successful. So, starting from Monday June 20, 2016, RTGS payments will be conducted in multiple currencies, which will bring further flexibility to the market.” Dr Mangudya said the multi-currency system will improve cash circulation and spur tourism inflows and diaspora remittances.
“For example, any tourist who is coming from Britain or China can feel free to use the British pound/yuan/US dollar. The move also makes it flexible for people in the diaspora who send money home. It will now be convenient for them to send money in the currencies of their choice, as long as that currency is in the basket.
“Furthermore, the use of multiple currencies means that people will cut on exchange losses if someone is to send money home. The RBZ is importing cash in the region of US$10 million weekly. However, we expect the amounts of cash imports to go down significantly if there is increased use of plastic money.
“We are happy that there has been progress in the use of plastic money in the past few weeks. If that trend increases, there will be a reduction in the need for cash as well as cash imports.”
Last week, Finance and Economic Development Minister Patrick Chinamasa told Senate that plastic money use had increased 400 percent over the last five weeks. Minister Chinamasa said there was no need to panic over the impending introduction of bond notes.
“To start with, (bond notes) will not lose their value. They will be just like bond coins. Yes, initially, when we introduced bond coins there was a lot of concern and resistance, but, eventually, people came to demand issuance of bond coins.
“So, the reaction that we are receiving, including the concerns you expressed, the worry; these were anticipated. Whenever new things are coming in, we expect people, generally, to be averse to change even where change is in their interest.”
On foreign retailers accused of siphoning cash to their home countries, he said: “The strategy is, basically, to encourage that even if they are retailers coming from outside the country, they source a substantial amount of their goods locally, especially those goods which can be locally produced.
“So, through measures such as tariffs and tariff bans or goods that we ban, we are going to get to a situation where they will have no option, but to buy locally. That is the discussion engaged in with the likes of companies that you mentioned. We are also engaging them, for instance, with respect to Pick ‘n’ Pay, to say they must support out-growers.”
Confederation of Zimbabwe Retailers Association president Mr Denford Mutashu told The Sunday Mail that they supported using multiple currencies and plastic money.
“We are fully behind the RBZ and Government polices to use multiple currencies. We will not have a problem in accepting any currencies which are in the basket. “It is also encouraging that some of our members, including sole traders, have increased usage of point of sale machines by as much as 70 percent.”