Zimbabwe vows fiscal discipline as it launches new currency

Zimbabwe's new currency will be backed up with fiscal discipline, Finance Minister Mthuli Ncube said on Monday, adding that the government would allow the RTGS dollar to fluctuate but would manage excessive volatility. Ncube spoke to Reuters as the central bank drip-fed dollars to a handful of commercial banks to allocate to large businesses, part of efforts to ease a cash crunch that has starved the country of many basic goods.
He said investors should not worry about the government ramping up issuance of Treasury bills, as it had done in the past. "That tap is closed for now," Ncube said.
Economists and business executives worry that if Zimbabwe does not curtail its borrowing, it could fuel inflation and a black market for dollars, making a foreign currency interbank market the central bank launched last week redundant.
Zimbabwe ditched a discredited 1:1 dollar peg for its dollar-surrogate bond notes and electronic dollars last week, merging them into a lower-value transitional currency called the RTGS dollar.
The central bank has been selling dollars to banks at a rate of one US dollar to 2.5 RTGS, a level which bankers have criticised as too low but which Ncube said was appropriate for now, calling it an "initial trigger point".
He declined to disclose where Zimbabwe got credit lines to launch the RTGS currency, or the size of those credit lines.
"Actually we can't tell you how deep our pockets are or how shallow they are. If markets believe you have too much money they can bet by saying we are going to make money out of these guys," he said.
Ncube added that the government was in talks with the International Monetary Fund over securing a staff-monitored programme and that the government had sufficient resources to meet civil servants' demands for salary increases.
Ordinary Zimbabweans are not yet able to use the RTGS dollars in their bank accounts to buy dollars from banks, and the bond notes - which many businesses are reluctant to accept - are still in circulation.
But big firms are happy that they have been promised greater access to foreign currency for critical imports.