Zimbabwe’s several currencies: Dollars, Bollars and Zollars…

October 9, 2017
mm

The ever alert JP Koning points to this Reuters article.

Zimbabwe has three types of currencies running as of now. There is Dollar (normal paper note), Zollar (Dollars stored in bank accounts) and Bollars (Bond notes  backed by a reserve). None seem to be working!:

The worthless Zimbabwe dollar was replaced by the U.S. dollar in 2009 but the economy has struggled over the last 18 months because of a massive domestic shortage of greenbacks.

 As a result, cash, especially crisp, new, $100 bills, has enjoyed a steady 10 percent to 20 percent premium over dollars stored electronically in bank accounts – nicknamed “zollars”.

But two weeks ago, the rumors that even the central bank had run out of hard currency sent the premium soaring to nearly 50 percent, according to black market traders and unofficial measures of the zollar value.

“I am really scared that I will wake up one day and find my money in the bank is worthless,” said Jethro Nkosi, a computer technician at a hotel in the capital Harare.

The central bank has not published currency reserves since dollarisation and Zimbabweans worry it is creating zollars without the backing of sufficient reserves or gold, leaving the system vulnerable to a crisis of confidence.

Bond notes are the third form of dollars used in Zimbabwe, besides cash and zollars. Like their electronic counterparts, the quasi-currency notes are meant to be equivalent to dollars issued by the U.S. Federal Reserve but they are now worth less.

The notes, backed by an opaque $200 million loan facility from the Cairo-based Afreximbank, were first introduced in November. This week they were trading at 1.3 to the dollar after weakening to as much as 1.5 in late September.

Much more there.

What is interesting is that a printed 100 US Dollar is valued more compared to the digital 100 US Dollar in Bank account (called Zollar). And then you have these Bollars which have been in crisis as well.

All goes to show why tinkering with money is such a bad idea. It erodes confidence in public authorities handling of currency which is then very difficult to get back…

Advertisements

Article Categories:
Regional Economics Blogs

Leave a Comment

Your email address will not be published. Required fields are marked *