Like everyone else, yesterday when we saw the government’s announcement that civil servants would be paid a Covid-19 allowance of 75 dollars, we called it dollarisation. It is not, civil servants are not going to be paid in real USD, they’re going to be paid in Nostro USD-there is a world of difference between the two.

Zimbabwe, the Kingdom of “funny money”

The Economist once called Robert Mugabe “the king of funny money”, making Zimbabwe by extension, the kingdom of funny money. Believe me, we have earned every stripe of that moniker-every one of it.

Don’t believe me?

Well consider this, during the first decade of this century here is what we did with our money the Zimbabwean dollar:

• First, we had normal Zimbabwean dollars let us call them ZWD, as inflation took its toll there were cash shortages, yes this is not the first time we have had these shortages you see?
• Then to counter these cash shortages the RBZ printed bearer’s cheques. It was all temporary they said, just until inflation retreated and everything went back to normal and then the bank would buy them back and to prove this would be true, the cheques would come with an expiry date. See they said, it’s not for ever and we believed them. It’s the RBZ there is no way they would lie to us-we said.
• Things did not get back to normal and inflation rose. Up and up it went no matter what the RBZ and the Finance Minister did each time they popped the hood and fiddled with Zimbabwe’s economic engine, for whatever good they did was all undone when the bank printed money to sate the government’s endless spending.
• Then along came the second Zimbabwean dollar, ZWN, in 2006 when the RBZ slashed zeroes from our currency and devalued the new currency to $250 ZWN to 1 USD. If you are wondering how he came up with that fixed rate you join the queue, it’s something RBZ governors are gifted with, they can dictate fixed exchange rates by law and so they often do.
• During that time, Governor Gono said Zimbabwe was in the process of printing a completely new currency but the “for a new currency to be viable, Zimbabwe had to first achieve macro-economic stability.” Sounds eerily familiar right?
• If you missed it let me explain it to you in simple words. The governor of the RBZ issued a new currency with fewer zeroes and everything but claimed he hadn’t done exactly what he had done. To solidify the denial the official name remained ZWD (smart folks call it the ISO code)-sounds like some bond notes story to me.
• So Operation Sunrise was launched, during a period of three weeks, everyone was supposed to exchange their ZWDs for ZWNs. Those who were holding eerrr sorry hoarding large amounts of ZWD (economic saboteurs I believe was the scientific term for these pests) would be required to explain their source of wealth or face arrest and economic ruin as the State would expropriate the money. Suffice to say despite screaming headlines from the Herald about how Mahommed Mussa had bales of cash (warning that article is behind a paywall) none of the saboteurs was ever really punished.
• Since this is about money I will skip over stuff about soaring inflation, profiteering/unscrupulous businesses and price controls.
• Less than a year later, still denying that the ZWN had become worthless, the official rate remained at $250 ZWN to 1USD while the black market rate stood at around $600 000 ZWN as to 1 USD the RBZ finally relented and came up with a fixed rate of 30 000 ZWN as to 1 USD. There was no logic to it except the RBZ governor felt like it was a more appropriate rate. He felt like it and so it was the law. Remember 1:1? This was their 3.5 RTGS:1 USD moment.
• So stupid was this assertion that WM/Reuters tossed the ZWD code and imposed the ZWN code whenever referring to Zimbabwean dollars. They even stopped using the official rate and started using a parity-based rate (OMIR). Yes, that is how the RBZ lost a lot of it’s international and local credibility.
• Eventually, the RBZ’s official new Zimbabwean dollar came on 30 July 2008 and this we call the ZWR. Zeroes were slashed off again. You would need a solid grasp of Maths to understand the relationships between ZWD, ZWN and ZWR and since you are already probably feeling dizzy and drunk on information overload, we are not going to bore you with these details.
• Somewhere in there the RBZ once introduced a new paper currency called a Special Agro Cheque ostensibly to be only used by farmers to buy agricultural inputs. Again it was temporary until it was not. Soon people, not just farmers, used that special piece of paper to buy bread and for every other transaction.
• Then what happened next? Aaahhhh the zeroes came back if you can believe that, faster this time; like really fast. So in February of the next year, the bank introduced another currency the ZWL. There is nothing to talk about there, the whole country rejected it and to save face the government pretended to retroactively adopt the multicurrency system that same month like it was their idea all along. Sorry, mea culpa is not in the vocabulary of our authorities.

And then?

Still do not believe we deserve the crown as the Kingdom of funny money here is what happened after:

• Frustrated by the USD and multi-currency straitjacket the government was just itching to spend more than it had. Then some brilliant guy realised something, the RBZ was in charge of inter-bank transfers! All they needed to do was type in numbers and send them to banks as money and so it was and the government restarted the printing press sometime in 2013 or thereabout who knows? Yes, even the current RBZ governor doesn’t know nothing about it– he said. (Probably in an Italian accent too.You know what I mean? If you don’t, it’s about time you watched The GodFather.)
• First, they printed a little electronic Zimbabwean dollars (RTGS we now call it), send it into civil servants bank accounts and other local accounts that needed paying. The civil servants would withdraw real USD and everyone was happy.
• In the beginning, it was $3.5 billion RTGS in those accounts, then it grew and grew and grew to the extent where it dwarfed whatever USD was in the country. Recent estimates put it at $35 billion RTGS but you bet it is still growing. A little $18 billion to fight coronavirus there, a little more here and who knows how much we have now.
• So this precipitated the current cash shortage crisis for which the government brought in the bond notes at 1:1. You know the rest of the story, denials and denials, then it was 3.5 ZWL as to 1 USD and now it’s 25 ZWL as to 1 USD. Also whatever problems we have are the saboteurs’ fault. Economic terrorist is the new scientific term.

Now you get it. In this country, the central bank has got some really smart fast-talking, slick, suit-wearing (sometimes ill-fitting, but hey they are still suits), charming, slippery two-timing… I think I just ran out of adjectives there so yeah there is that to consider.

Man that was long a boring story, what has this got to do with civil servants earning USD?

Sigh! I thought you were paying attention? The notice from yesterday clearly shows that they are going to be paying civil servants in Nostro USD. Yes, that is another currency introduced back in 2018 by our current RBZ governor and Finance Ministry authorities. Nostro USD accounts are just FCA Accounts holding USD, there is nothing Nostro about them i.e. they are not in another country, there are right here in Zimbabwe. The Nostro part stems from the fact that the funds in them are from abroad and the RBZ has promised the money in there will be safe. You see? They promised they wouldn’t or couldn’t take it. The funds in there are ring-fenced and everything. I told you these are fast-talking and slick … eerrr guys and gals.

Except there are very real differences between Nostro USD i.e. funds in a Nostro account and real USD cash. Here are some:

• If you have real USD it’s yours to keep in a mattress until when you want to spend it, with a Nostro balance the RBZ can tell you when to spend it. For some types of Nostro, yes there are all kinds of Nostros. Nostro from export proceeds, local transfer Nostro and there are free funds. You have to spend the first two in 30 days or your bank will spend them for you and give you money at an official rate which currently stands at $25 ZWL as to $1 USD
• With Nostro USD you have to actually withdraw the money for it to make it actual USD cash. That might not be as easy as you would think. In fact, banks have an incentive not to dish out cash. Because:
  1. It’s expensive to bring cash to Zimbabwe like really expensive
  2. There is not enough cash to be matched against Nostro balances
  3. Remember, if they hold on to that Nostro they can give you ZWL instead?

• It’s USD until the RBZ says it’s not. They wouldn’t dare, you say? Well, remember what they did in 2018? By then the official line was: How dare you demand real USD? Where did you get it? Are you an exporter? If you are not exporting you don’t deserve USD. Never mind it was your very own USD to begin with.

Now that we have gotten that out of the way it’s time to educate you. Nostro USD and real USD are like the RTGS and the bond. Nobody tells you how much bond you get to spend in a day but they can tell you that you cannot do more than two transfers or spend more than $100 000 ZWL in a month.

This is not dollarisation civil servants are just getting some Nostro love

All indications are that civil servants are getting Nostro USD which is a new de facto mini-currency, the latest in our beloved Kingdom of funny money. Do not for a second call this dollarisation or real USD. One command and one click of the mouse and it will all vanish like the mist at sunrise. Poof! Gone forever before you can say Afreximbank.

NB

The smart-kids among you noticed the fact that last year, Zimbabwe did not technically introduce a new currency. The current ZWL (the fourth Zimbabwean dollar told you this was a kingdom) is simply a reprise of the Zimbabwean dollar we had back in February 2009. If you didn’t notice that, God bless your soul, you are really a special human being. Yeah, I mean that kind of special! Jeez, how thick are you?

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