Demonetisation refers to the act of withdrawing a currency from further use and stripping its status as legal tender. That is necessary when a currency has been exhausted by inflation or the nation has changed currency. “The demonetisation of the Zimbabwe dollar remains outstanding and previous budget pronouncements have indicated intentions to bring finality to this issue,” Finance and Economic Development Minister, Patrick Chinamasa, said recently.
“Government will, therefore, set aside resources in 2015 for the demonetisation programme.” He, however, did not explain what was stalling the exercise and how much would be allocated to bring it to finality. When the country partially dollarised on February 1, 2009, individuals, organisations and companies lost quintillions and some sextillions of Zimbabwe dollars in bank accounts.
Chinamasa had in this year’s budget put aside US$20 million for the exercise which should have been finalised in March. Chinamasa had said it was important that the local currency be demonetised and that the Zimbabwe dollar balances, including paid up permanent shares (PUPS), be converted to US dollars for those accounts in financial institutions’ books as at January 31, 2009.
The matter, according to Chinamasa was expected to be resolved through the issuance of Treasury Bills to the respective financial institutions for them to further credit bank accounts of their clients. Those Treasury Bills were to be granted a tier one capital status.
Former finance minister Tendai Biti had attempted to demonetise the Zimbabwe dollar during the inclusive government, but failed due to financial constraints. Treasury in 2012 was yet to determine the exchange rate to use in settling payments for Zimbabwe dollar account holders.
A committee comprising officials from government and the Bankers’ Association of Zimbabwe was set up to work on the requisite details and modalities to operationalise the process. – Mandla Tshuma