Faced by a runaway hyperinflation in 2008 which left every citizen a poor billionaire, the Zimbabwe government discarded the Zimbabwean dollar and instead opted for the US dollar in a bid to stabilize the economy.
However, the economy has stayed stuck in first gear. Zimbabwe’s industrial production has remained subdued and with no substantial export to inject much needed foreign currency into an ailing economy, the US dollar reserves in circulation started to dwindle. This forced the fiscal authorities to introduce a new US dollar equivalent currency called bond notes last year.
Reserve Bank of Zimbabwe governor John Panonetsa Mangudhla still argues that the purpose of the introduction of the dollar denominated bond notes was to fund a five-percent export incentive, meant to stimulate the circulation of US dollars in the economy. However, what has happened is the bond note has become the major medium of exchange after actual US dollar stocks diminished to precarious levels.
The value of the bond notes has dropped significantly on the unofficial market against the dollar over the past four months, even though the central bank pegged its value at par with the US dollar.
This is because the scarcity of the US dollar in circulation has necessitated the unofficial transaction of the bond to US dollar on the parallel market.
Now with the US dollar, bond notes and plastic money in circulation, unscrupulous business people have developed a black market of sorts to start pegging different prices for the same commodity depending on the mode of payment.
Retailers and other businesspeople are charging extra for payments made in bond notes or bank cards but less for US dollar cash transactions.
The same item can have three different retail prices, costing $80 when using cash, $100 using bond notes and $120 when one is uses a bank card.
While the unofficial three-tier pricing regime persists, the government is insisting that it is illegal, but it doesn’t have the appropriate legislative tools to curb the vice. This has made Zimbabwe’s legislature fast track the Reserve Bank Amendment bill into law.
RBZ deputy governor Khupukile Mlambo acknowledged that the three-tier pricing regime was giving the central bank a headache.
“There are retailers who are practicing the three-tier pricing system for bond notes, swiping and US dollar. We want to be very clear that this is illegal, Mlambo said. “We have an Act that we can invoke. I really want to discourage retailers who are doing so.”
“The last thing you would want is to arrest people. This is a contested environment and if we arrest people, they will say we no longer want to invest in Zimbabwe.
Zimbabwe’s central bank has been battling to deal with a multi-tier pricing system since the liquidity crisis deepened.
Most banks in the country are giving only $50 to individuals per week.
Local foreign currency bank accounts have dried up, impacting on the importation of raw materials and other critical requirements sourced externally.
As the liquidity crisis deepens, Zimbabweans are having to switch to other payment platforms that are not backed by physical cash. Businesses have adopted strategies to preserve the value of their investment by putting a premium to each and every type of payment system depending on its vulnerability to market forces.
Companies have been struggling to access the foreign currency to make foreign payments for raw materials. A number of them are sourcing the foreign currency on the black market This has increased pressure on the demand for cash, hence the discounts on cash transactions.