Zimbabwe currency and notes disappeared in the printing press in 2008 with the last note being ZW$100 trillion dollars before the adoption of the multi-currency regime in February 2009. The US$ remained the dominate currency among a basket of other currencies. The notes are now back in the printing press in form of bond notes pegged at 1:1 against the US$.
Meagre exchange control rules & regulations, banking system and lack of economic stimuli failed to address liquidity challenges in the country as the populace, traders and Chinese investors continue to hoard and export huge amounts of the greenback. In a desperate move to address liquidity challenges, the Reserve Bank of Zimbabwe (RBZ) Governor, introduced bond notes on the 28th of November 2016 among other inimical measures like withdrawal limits. The devaluation of the US$ and introduction of bond notes, a surrogate currency to the US$ has already started to yield peculiar consequences for the economic crisis. Cash transactions are trading at a discount while other forms of payments at a premium. A survey carried out in the black market shows that the South African Rand (ZAR) is trading at a rate of 7.600 and 7.800 for a real USD notes and Bonds notes respectively. This presents the perfect opportunity for arbitrage, signalling the start of money “burning”.
Foreign currency shortages have loomed as importers of raw materials are failing to secure funding in time and more woes will continue for the short to medium term as the bad currency is driving away the good US$ notes; proving Sir Thomas Gresham (1519-1579) theory “Bad Money Drives out Good Money” correct. Undoubtedly, there is an increasing lack of confidence and uncertainty in the economy and the banking system. More needs to be done by RBZ and Finance ministry to bring back hope and turn the dry bones to life.