Zimbabwe’s central bank governor says new currency to exchange 2.5 to a U.S. dollar

Zimbabwe’s new currency, the RTGS dollars, is expected to begin trading at around 2.5 to the U.S. dollar, Central Bank Governor John Mangudya said on Friday. This is a significant devaluation, as the regulator attempts to stem chronic cash shortages which have deepened economic woes in the country.

On Wednesday, the Reserve Bank of Zimbabwe (RBZ) said it would scrap a peg between its quasi-currency bond notes and the U.S. dollar and create the RTGS dollars.

Although some economists have criticized the move, Mangudya said trading on the Interbank market had started on Friday morning, according to Reuters.

Mangudya said the RTGS dollars would bring sanity in the foreign currency market, promote exports, boost diaspora remittances and investments, eliminate multi-tier pricing, and also preserve the value of local forms of money. According to him, the bank has arranged sufficient lines of credit to maintain adequate foreign currency to underpin the foreign exchange market. He said foreign currency from the interbank market shall be utilised for current bona fide foreign payment invoices, except education.