In the dynamic realm of the Zimbabwean economy, constant fluctuations create a challenging environment for locals, let alone foreign observers attempting to navigate its intricacies. In recent weeks, the government, acting through the Reserve Bank of Zimbabwe’s esteemed Monetary Policy Committee (MPC), has implemented a series of consequential alterations in its foreign currency selling practices. To label the outcome as seismic would be an egregious understatement, for the impact has been nothing short of profound. Let us review some of the changes that have taken place in the past couple of weeks:

On 23 May the RBZ Auction Rate was $1404.8039 ZWL, and the interbank mid-rate was $1448.9388 ZWL, and on the black market you needed about $3 600 ZWL to get one USD but only $1700 ZWL if you had cash.
Just a week later on 30 May the Auction Rate was $2577.0564 ZWL, and the interbank mid-rate was $1989.1122 ZWL, on the black market you still needed about $3 600 ZWL to get one USD but only $1800 ZWL if you had cash.
One more week later on 6 June the Auction Rate was $3673.7718 ZWL, and the interbank mid-rate was $2769.9366 ZWL, on the black market you now needed about $4 600 ZWL to get one USD but still only $2600 ZWL if you had cash.
The following day the government conducted their inaugural bulk auction where they sold foreign currency to banks at a rate of $4868.5152 ZWL per 1 USD. The black market rate has since ballooned to $7000 ZWL in some quarters while some shops are using a forward rate of $12 000 ZWL.

It is understandable if in all this confusion you missed one essential bit. In all the turmoil, one member of the Zimbabwean dollar family has remained unperturbed barely changing in the midst of all the chaos. The black market for “bond notes” (the colloquial name for ZWL cash in Zimbabwe) has remained relatively stable. In fact, you could go out right now with just $2 000 ZWL cash on the streets of Harare and expect to find a number of people willing to give you their USD in exchange for that many bond notes. If you up that to $2 400 ZWL your bond notes will be gone within the hour despite the fact that the official rate is now around $5247.0989 ZWL.

Why are bond notes worth double the value of RTGS?

Just to clarify, Zimbabwean dollars in cash or bond notes as they are called are currently worth more than double in RTGS. To provide further clarity, it is important to note that Zimbabwean dollars, specifically in cash or bond note form, currently hold a value that exceeds twice the worth of the RTGS (Real-Time Gross Settlement) currency. This means that if you have $10 000 ZWL in cash you have about $20 000 ZWL in RTGS terms (RTGS refers to electronic Zimbabwean dollars in a bank account or mobile money wallet). Even though in the eyes of the RBZ, Ministry of Finance and the rest of the government $10 000 ZWL cash is equal to $10 000 ZWL RTGS on the streets of Zimbabwe this is not the case. Bond notes are worth more and there are several valid reasons for this:

There is far less ZWL cash in the Zimbabwean economy. The government is acutely aware of what happened back in 2008. They printed too much ZWD (old Zimbabwean dollars) and their value plummeted because people could see it. You can hardly expect the price of bread to remain the same when people are going around holding trillion-dollar notes. This time around the government has resisted the urge to physically print money. The biggest note is the $100 ZWL note. ZWL notes are but a tiny fraction of ZWL’s money supply. There are not enough ZWL notes for dealers on the black market to splash around and pay hefty rates.
Related to supply is how hard it is to get these from a bank. There are not many sources of supply for these notes. That’s why even government-owned entities like ZUPCO are struggling to find ZWL to give to people as change.
Freedom-when you have ZWL cash you can do whatever you want with it and the government would not even know or be able to stop you. The same cannot be said of the RTGS. Whenever there is a spike in rates the RBZ’s Financial Intelligence Unit (FIU) goes around freezing accounts of “suspected currency manipulators”. They eventually unfreeze these accounts but the punishment would have already been dished out. While your account is frozen the rate is climbing wiping out the value of your money. The FIU cannot freeze bond notes and your trading is secret and not subject to said freeze.
Taxes and bank charges-when he came into office the current Finance Minister hiked the IMT tax (he did not introduce it, the IMT tax has always been there but it was fixed to under 10 cents per transaction). The tax irked a lot of people and over time the costs add up with double or even triple taxation being a thing. Then there is the matter of ordinary taxes. Lots of people and businesses do not like them. Gather enough ZWL in your account and ZIMRA might just notice you. Keep your ZWL as cash and the taxman will be non-the-wiser seems to be the prevalent feeling.
The huge informal sector-Zimbabwe’s informal sector contributes about 70%-75% of Zimbabwe’s economic activity. The elite, the government and even economic pundits treat it with contempt and derision. In their eyes, they are cockroaches that need to die so the country can get back to the good old days when the economy was dominated by large big firms that employed everyone. It is a sector that confounds them and they are not happy about it. However, like the proverbial cockroach, the informal sector has defied their animosity and even thrived. The informal sector has devised a whole repertoire of instruments and strategies to shield themselves from the frequent policy bombings they get from the authorities. The foreign currency black market and the use of cash, including ZWL cash, is an indispensable part of that array of tools. They value it immensely they are willing to get half the official rate!

Given all these facts it’s not surprising that ZWL notes have far much value than the RTGS dollar. The government can just punch zeroes in a computer and create more RTGS with anyone being the wiser but that is far much harder to do with ZWL notes. In fact, given the current worth of the biggest notes in circulation, it would not even be economical for the government to suddenly resume printing these notes and trading them on the black market. So the people of Zimbabwe are not crazy they are far more shrewd and economically literate than you would think at first glance.

They might not be doctors and professors of economics and elite universities but they have survived multiple economic meltdowns the sort of which professors will never live through. Experience is a far better teacher than any book will ever be. The stakes are higher when your very survival is at stake. Economic acumen is not just in our brains, it’s in our blood. It is woven into the very fabric of our DNA.