Anxiety grips Zimbabweans as new currency directive decimates savings
The shadow of the economic meltdown in 2008 looms large as local savings slide
Harare — They say lightning never strikes the same spot twice but for Desmond Sibanda, a 38-year-old Zimbabwean, calamity struck again this week when the government — for the second time in 10 years — made a policy pronouncement that wiped out part of his life savings.
At the height of the economic meltdown in 2008, the cash-strapped Zimbabwean government invaded all US dollar-denominated accounts to pay off debts and finance imports. Sibanda’s holding of $15,000 was one of those raided.
His plan to buy a semidetached house in the high-density suburb of Mkoba, in Zimbabwe′s third-largest city of Gweru, was stopped dead in its tracks when the government, without notice or consultation, gave the Reserve Bank of Zimbabwe (RBZ) access to foreign-currency-denominated accounts.
"I had the equivalent of $15,000 in my account but my bank, CBZ (Commercial Bank of Zimbabwe) said all accounts had been frozen. Weeks later I returned to the bank only to be told that all they could do was give me back $5. Just a mere $5 from the $15,000 I had saved,” he remarked angrily.
He said the 2008 economic disaster forced him to relocate to SA for three years before returning home. After years of rebuilding his savings, Sibanda is in the same position again.
The government′s new policy measures include separating foreign currency accounts from local denominations, and increasing tax on transactions.
Experts say the RBZ in effect reintroduced the dreaded Zimbabwean dollar and retracted its flawed decision to implement its local bond note at par with the US currency.
The impact has hit Zimbabweans hard. All local currency savings are now 50% of what they were worth before last week′s directive and are sliding every day, as the country's currency exchange rate to the US dollar continues to plunge.
At the same time, the scenario has led to rapid price increases and anxiety over the future.
Rebalancing the economy requires tough and painful measures to deal with the root causes of the economic challenges facing the Zimbabwean economyZimbabwe Reserve Bank governor John Mangudya
Announcing the monetary policy statement last week, RBZ governor John Mangudya conceded that the measures were “tough” but necessary.
“The policy measures proffered in this statement are designed to boost confidence and transparency in the foreign-currency market and to rein in inflation by mitigating against rent-seeking behaviour and mopping up excess liquidity within the economy. The measures are necessary as a starting point towards right sizing or rebalancing the economy. Rebalancing the economy requires tough and painful measures to deal with the root causes of the economic challenges facing the Zimbabwean economy.”
Finance minister Mthuli Ncube told journalists last Tuesday that there would be no raid on bank accounts.
“So we learnt a hard lesson. I would not recommend that to anyone to say raid people’s accounts. It is not a good idea, not under my watch if I am allowed to watch over those FCAs as minister of finance.”
But few people believed him.
Economist John Robertson told Business Day in Harare that few Zimbabweans trusted the government.
“It’s a very complicated issue and I think government should eat humble pie and reverse its pronouncements, especially the high tax, because it is driving prices outrageously upwards and it will keep investors away. Given what they did in 2008, the public will not believe them. No-one trusts that the government will not raid their accounts. People would rather keep their forex at home than in bank accounts. Government has made many promises that it has not kept so the people are not likely to have trust in them.
“Many people are worried that even the money that they saved as local currency is fast losing its value. In just a few days, the value has diminished by 50% to the US dollar. Although it is not as bad as 2008, it definitely shows that government needs to do better,” he said.
Zimbabwean lawyer and commentator Alex Magaisa said on Twitter that the new measures were “a raid by another name”.
For Sibanda, the feeling of déjà vu is inevitable. It is all the more painful as in 2008, Mangudya was the CEO of CBZ, the bank that wiped out his savings.
″Seeing the same face who cost me so much has obviously brought back fears of the old. I have obviously lost out my money by about 50% this time, but at least it’s not as much as 10 years ago,” he said.
Banks are at pains to reassure depositors that all will be well.
On Thursday, Nedbank, which only recently established itself in Zimbabwe, said in a circular to its clients that foreign-currency accounts would be safe.
“All existing clients on our books who are foreign currency earners, that receive international organisations remittances, diaspora remittances, free funds, export retention proceeds and loan proceeds will have their accounts automatically separated into Nostro FCAs (new account) and local RTGS FCAs (existing account),” the bank said.