20 years on, how the Zimdollar died


2004 – Still unwilling to float the currency, the government comes up with a Managed Foreign Exchange Auction System that January. Exporters sell a quarter of their forex at a fixed rate of Z$824 and another 25 percent at an auction rate. Exporters keep the other half in their foreign currency accounts for up to 21 days, after which they must offload the remainder at the auction rate.

The system is initially welcomed by exporters, but they soon reject it as it becomes clear that RBZ is keen to control the rates, resulting in losses for exporters.

Gono’s financial sector measures start taking their toll on banks. On January 3, Century Discount House shuts down. That January, eight other banks are kicked out of the clearing system for failure to fund their RTGS positions. So begins the weakening of confidence in banks.

More bearer cheques arrive in January, with a June expiry date. That same June, another batch comes, this time with a December 31 expiry date. However, even those cheques with a June expiry date remain legal tender.

The cheques are mocked by the public. At the launch of Barbican Bank, Murerwa jokes: “I know you are all concerned about the current cash crisis. I am too. I am however more concerned because I am now being called Mr Burial Cheques.”

2005 – The forex auction system isn’t working. So, on October 21, Government replaces it with the Tradable Foreign Currency Balances System (TFCBS). Under this system, there is a dual exchange rate system; market transactions are done at an interbank rate, while Government transactions are done at the fixed official rate. It obviously doesn’t work.

2006 – The dual exchange rate system is replaced in April, and all transactions are now at the interbank rate. The rate collapses. The Zimdollar is devalued again in July to $250.

New bearer cheques arrive, in a series of 1 cent, 5 cents, 10 cents, 50 cents, $1, $10, $20, $50, $100, $500, $1 000, $10 000 and $100 000.

Then, on August 1, the madness begins. Desperate, RBZ lops off three zeros from the currency. Gono launches a massive marketing campaign, dubbed “Operation Sunrise”, hoping to package this as a good thing.

“Say no to zero and hello to hero,” Gono says.

2007 – On the 7th of September, the Zimdollar is devalued again to $30 000. Still, the government is playing catch-up; on the black market, the Zimdollar is ten times weaker at $300 000 per US dollar on the parallel market.

Desperate, the government tries to ban inflation; retailers are ordered to cut prices by half. It does nothing to stop inflation and shop shelves go empty. The Government stops publishing inflation stats regularly.

On July 1, a $500 000 note is introduced, but it is valued at just US$12 even at the official exchange rate. On New Year’s Eve, RBZ launches a $750 000 note.

Continued next page


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The Insider

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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