Yes, I’m optimistic enough to think about after the coronavirus….
As you likely already know, yesterday the Reserve Bank of Zimbabwe and Ministry of Finance termed the US dollar legal tender mainly due to the Coronavirus. The move , as stated in the official press statement below, is to make it easier to transact in this current national and global crisis, especially as most banks closed today and thus officially exchanging any foreign currency would be at the very least quite troublesome, along with the country’s “limited access to foreign finance”. The statement also talks about the official fixed rate of USD to ZWL being 1:25, and of course has everyone raising their eyebrows. But while it’s definitely easy to get caught up in what this new move means and how it will affect the market, I’m hopeful (or naïve) enough to think about the future after the COVID-19 pandemic, and what all these drastic moves are going to mean.
Now just for recap purposes, the US Dollar was deemed illegal tender in June of last year, after almost another year of an official multi-currency system and the multiple effects it had on our market and prices within our country. But even after the USD was deemed illegal tender, it was still unofficially being used by most Zimbabweans, with the country essentially “redollarising” regardless of what the official Reserve Bank statements were. In fact, for many, yesterday’s announcement essentially makes redollarising official, though most of us probably wouldn’t find that as a fact to celebrate, especially with a global health pandemic looming over our shoulders. But here’s the question, the USD reinstatement is seemingly an emergency measure, so what happens after the emergency is over. And yes, this is a very optimistic view, but who wants to think the world is going to end? So, until it does, I’ll assume it’s going to keep spinning and wonder what will happen to Zimbabwe’s financial and momentary ecosystem. So, will the US Dollar be rendered illegal tender again? And will the interbank rate just jump up to match whatever the black-market rate is again? Even in such a time where trade, business and commerce of any kind are going to be limited, there are still likely to be some impacts from using the USD officially again, and the extent of those impacts will be what worries some. If they’re good, how far will they continue if the USD is deemed illegal again? If they’re bad, how quickly does banning the USD again eradicate them. That’s an extreme oversimplification of the situation but the answer to both those questions remains the same; one can only guess with our government and its financial sects. In fact the obvious rumors about why the USD is being reinstated (alongside the more logical reasons) have already begun making the rounds, and I’ll be honest enough to say I believe a few of them.
But what I believe doesn’t really matter here. In fact, what does matter will only be found out after the COVID-19 crisis, and will be based on factors like how many Zimbabweans will willingly use US dollars anyway. Those are all facts that remain to be seen, and when we make it to the other side, you can refer back to this point and see if there’s any significant changes. For now, just stay safe, stay indoors, and use USD (if you have it) at your discretion.