Zimbabwe’s Finance and Economic Development Minister Mthuli Ncube has admitted that the government created fake United States dollars to cover indebtedness to local institutions.
In his opposing affidavit in the matter between Duncan Hugh Cocksedge and CABS, the RBZ and the Minister of Finance and Economic Development, dated 20 July 2020, Ncube explained how and why the Government of Zimbabwe created fake United States dollars.
Below is part of Ncube’s submissions at the High Court of Zimbabwe:
It was in pursuance of this issue of currency reform that I recognised that the currency we were commonly using as at October 2018 was both in United States of America and currency which had been created by the State through borrowing from the Central Bank and issuance of treasury bills to cover the indebtedness to local institutions.
It was therefore essential in terms of currency reform to separate the two different currencies which were both being transacted as dollars of the United States of America.
In order to achieve the separation, the Reserve Bank of Zimbabwe issued a monetary statement in October 2018 directed at banking institutions.
The banking sector was directed to separate customer accounts holding actual dollars of the United States of America from accounts holding created money which was not the currency of the United States of America.
In order to avoid creating a burden on bank customers, the banks were directed to open what was described as “Nostro” accounts into which dollars of the United States of America would be deposited without charging the customers.
The non-United States dollar currency would then remain in the customer’s existing accounts.
The Reserve Bank directive contemplated that bank customers would ensure that their deposits of actual United States dollars which were in their existing accounts (if any) would be transferred to the newly created Nostro accounts.
This process of separating the United States dollar currency from non-United States dollar currency was given time so that bank customers would not suffer any prejudice as a result of any situations of disagreement with their banks.
It was only after a period of approximately four (4) months that I issued Statutory Instrument 33 of 2019 which then gave a name to the non-United States dollar currency. That name was RTGS dollar.
That name was both befitting and apposite in that non-United States dollar currency was not a physical currency but was a currency which could only be transferred through the Real-Time Gross Settlement of the Reserve Bank of Zimbabwe.