On Friday 22 February 2019, our analyst; Batanai Matsika had an interesting interview with South Africa's Business Day TV (DStv Channel 412).
The conversation focused on the recently announced Monetary Policy Statement by the Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya which ushered in the Interbank Foreign Exchange Trading System as well as the RTGS Dollar (the video clip is accessible on YouTube, see link address below).
One of the interesting questions posed was whether the RTGS dollar can be equated to a crypto-currency such as Bitcoin. We recall that the idea of a crypto-currency has been thrown around by different experts in various forums as a solution to the liquidity and currency constraints in Zimbabwe. Venezuela, for example, is another country that has been facing deepening economic and political crises.
The country introduced a new digital currency called the Petro. According to the government, the Petro is RTGS Dollar≠Crypto-currency SHORT VIEW Batanai Matsika backed by oil, gas, gold and diamonds, and is meant to help overcome US and EU sanctions. It was also announced that all citizens and companies will be able to purchase ‘Petros' on a specialised website with Yuans, Rubles, Turkish liras, and Euros, as well as with cryptocurrencies such as Bitcoin and Ethereum.
According to Cointelegraph, the Petro is now used as a unit of account in the country, with salaries and the prices of goods and services tied to the oil-backed national cryptocurrency. While the Zimbabwean RTGS dollar is largely electronic (RTGS balances) it lacks the properties of a crypto-currency given that also takes the form of physical bond notes and coins.
Further, crypto-currencies are built on a backbone technology known as the block-chain network. Crypto-currencies such as Bitcoin and Ethereum are unique in the sense there are built on a decentralised, open source system that enables peer-to-peer transactions that are independent of any central government. In the case of the RTGS dollar, the RBZ has control and can print physical RTGS dollars (bond notes and coins) or create electronic money through instruments such as Treasury Bills. Further, the RTGS dollar is currently not backed by any commodities such as oil or gold as is the case with the Petro.
Meanwhile, banks in Zimbabwe have commenced trading of the RTGS dollar at a rate of 2,5 to the USD. The RBZ advised that it had met with banks and agreed to start at a rate of 2,5, which is lower than the prevailing rate of around 4,0 on the illegal or parallel market. The RBZ has also stated that it has put in place a number of safeguards to ensure that the exchange rate is going to remain stable. On Friday 22 February 2019, the total value traded on the interbank market was USD5,0m.
The RBZ will also be publishing the daily rate in all local newspapers. While the RTGS dollar is definitely not a crypto-currency, we opine that the RBZ might have just used the "back-door" to introduce a new Zimbabwe dollar, which is literally a clone of the real USD and amongst the most valuable in the Southern African region.
We expect the rate of the RTGS dollar to settle around the 3,5 mark against the greenback.
---- Batanai Matsika Head of Research - Akribos Research Service +263 78 358 4745 firstname.lastname@example.org