Many investors selling stands or lending have woken up to situations when they are being repaid in bond notes or RTGS dollars that are declining in value when agreements of sale were drawn up in United States dollars. Just like pensioners, these investors are incurring losses on their investments as the quasi-currencies systemically loses their value and purchasing power, hence value.
By Martin Tarusenga
This occurs as prices, of commodities, property and services have been rising by the day, and in some instances by the hour. This terminal decline of the the RTGS dollar is occurring in similar fashion to the decline of the now defunct Zimbabwe dollar.
Inevitably, investors are in a catch-22, but have to survive. In keeping with the motivation and implications of the government’s policy shift to the use of multi-currencies in 2009, and disillusioned by the breaking of the subsequent 2016 government promise that the bond note will operate at parity with the US dollar, citizens and economic agents have again rationally resorted to using the greenback as the store of value.
Equally, members of the public will not, or are unwilling to dispose of their valuables such as property, including stands, in bond RTGS dollars as there is a high risk that the sale proceeds may not be able to secure another such valuable.
The US dollars are readily secured from the dominant parallel foreign exchange market. The rate at which the US dollars are secured is driven by skewed economic fundamentals.
The skewed economic fundamentals sustain the continued decline in the RTGS dollar to the prejudice and detriment of recipients who hold them longer than necessary.
Economic agents in these circumstances are, therefore, finding it prejudicial to take certain actions not least holding the RTGS dollar for longer than is necessary or entering into or maintaining financial agreements in the local currency (be they long-term or short-term) and in using the official foreign exchange markets if at all they are accessible.
Apart from disposing of all excess bond notes or RTGS dollars at the prevailing market-driven foreign exchange market, it is therefore rational in these circumstances to revise all financial agreements to prevent certain losses that may come through holding on to the terminally declining RTGS currency.
Many of those that have entered into long-term agreements to sell valuables such as property, or loans, say under the multi-currency regime of February 2009 to November 2016, they are having to revise the agreements or are consequently resigned to sure losses.
Those economic agents that have or are revising such agreements are fortified by government policy shift to adopt multi-currencies in early 2009. The policy shift was, in fact, a recognition by government of the systemic loss of value of the demonitised Zimbabwe currency.
The decline of the Zimbabwe dollar during the hyperinflationary era a decade ago is now being carried through by the bond notes and RTGS dollars.
The Zimdollar, prior to 2009, was identifiable at each point when there was a redenomination by the removal of zeros.
Economic agents are further moved by government’s insincerity in reneging on its November 2016 promise and subsequently on promises earlier this year that the bond note and the US dollar will operate at parity.
Indeed, some court judgments have already attested to the need to recognise value in the worthy multi-currencies and pay remedies in the multi-currencies for financial agreements entered into (or services offered) when currencies in terminal decline were in operation. Hence, each such revision will aim to assess whether the RTGS dollar repayment is worth the original value in US dollars, with the method of valuing directly deriving from implications of related relevant government policies such as adopting multi-currencies.
More specifically, the valuation method will derive from or be underpinned by the motivation of government’s adoption of multi-currencies in 2009 and recognising the impracticability of the continued use of the fourth Zimdollar in the face of this currency’s significantly diminished value. They will further derive from the subsequent introduction of the bond note in 2016 and early 2019, respectively, premised on the unrealistic government promise and undertaking to citizens that the currencies will operate at parity with the US dollar.
Of necessity, opportunity costs (interest) and other costs incurred as these government policy shifts adversely impact parties to the agreements, will need to be incorporated in the re-assessments.
Parliament and President Emmerson Mnangagwa’s government must, as a matter of constitutionality, recognise the prejudice that its policies are inflicting on citizens.