The Zimbabwean dollar (sign: $, or Z$ to distinguish it from other dollar-denominated currencies) was the name of four official currencies of Zimbabwe from 1980 to 12 April 2009. This article delves into the history of the Zimbabwean Dollar (ZWD) and its exchange rate dynamics with the Indian Rupee (INR), exploring the factors that led to significant currency reforms and hyperinflation.
The Zimbabwean dollar was introduced in 1980 to directly replace the Rhodesian dollar (which had been introduced in 1970) at par (1:1), at a similar value to the US dollar. In the 20th century the dollar functioned as a normal currency, but in the early 21st century hyperinflation in Zimbabwe reduced the Zimbabwean dollar to one of the lowest valued currency units in the world.
Use of the Zimbabwean dollar as an official currency was effectively abandoned on 12 April 2009. On 24 June 2019, the Reserve Bank of Zimbabwe abolished the multiple-currency system and replaced it with a new Zimbabwe dollar (the RTGS Dollar),[9] which was the only official currency in the country between June 2019 and March 2020, after which multiple foreign currencies were allowed again.
The Zimbabwean dollar's predecessor, the Rhodesian dollar, was essentially equal to half of the value of the pound sterling at the time of its adoption (during the decimalisation of 1970). A similar practice was used in other Commonwealth countries such as South Africa, Australia, and New Zealand.
Zimbabwe and Hyperinflation: Who Wants to Be a Trillionaire?
The Rise and Fall of the Zimbabwean Dollar
The first Zimbabwean dollar was introduced in 1980 and replaced the Rhodesian dollar at par. The initial ISO 4217 code was ZWD. The value of the dollar began to erode significantly from August 1991 onwards: originally, this was because of the Economic Structural Adjustment Programme (ESAP), a programme of economic liberalisation that dismantled a planned "siege" economy from the UDI era.
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The currency's official and parallel rates continued to plummet in the context in falling incomes from exports, the chaotic redistribution of land to inexperienced farmers, and Zimbabwe's involvement in the Second Congo War. In October 2005, the Governor of the Reserve Bank of Zimbabwe at the time, Dr. Gideon Gono, announced that Zimbabwe would have a new currency the following year, and new banknotes and coins would be produced.
However, in June 2006, it was decreed that, for a new currency to be viable, Zimbabwe had to first achieve macro-economic stability. Instead, in August 2006, the first dollar was redenominated to the second dollar at the rate of 1000 first dollars to 1 second dollar (1000:1). At the same time, the currency was devalued against the US dollar, from 101000 first dollars (101 once revalued) to 250 second dollars, a decrease of about 60%.
ISO originally assigned a new currency code of ZWN to this redenominated currency, but the Reserve Bank of Zimbabwe could not deal with a currency change, so the currency code remained 'ZWD'. The revaluation campaign, which Gideon Gono named "Operation Sunrise", was completed on 21 August 2006. The following year, on 2 February 2007, the RBZ revealed that a new (third) dollar would be released.
However, with inflation still exceeding 1000%, the banknotes were kept in storage. During the same month, the Reserve Bank of Zimbabwe declared inflation illegal, outlawing any raise in prices on certain commodities between 1 March and 30 June 2007. On 30 July 2008, the dollar was redenominated and given a new currency code of ZWR. After 1 August 2008, 10 billion ZWN were worth 1 ZWR. Coins valued at Z$5, Z$10 and Z$25 and banknotes worth Z$5, Z$10, Z$20, Z$100, and Z$500 were issued in ZWR.
Due to frequent cash shortages and the apparently worthless Zimbabwean dollar, foreign currency was effectively legalised as a de facto currency on 13 September 2008 via a special program. This program officially allowed a number of retailers to accept foreign money. This reflected the reality of the dollarisation of the economy, with many shop keepers refusing to accept Zimbabwe dollars and requesting US dollars or South African rand instead.
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Despite redenomination, the RBZ was forced to print banknotes of ever higher values to keep up with surging inflation, with ten zeros reappearing by the end of 2008. Despite the introduction of the fourth dollar, however, the problems were not eliminated, and the economy continued to be almost completely dollarised.
In his first budget, the Zimbabwe finance minister, Tendai Biti, stated "the death of the Zimbabwe dollar is a reality we have to live with. It was reported that on 1 July 2008 the company's management board decided to cease delivering banknote paper to the Reserve Bank of Zimbabwe with immediate effect. The use of foreign currencies was legalised in January 2009, causing general consumer prices to stabilise again after years of hyperinflation and price speculation.
In June 2015, the Reserve Bank of Zimbabwe began to formally demonetise the Zimbabwean dollar, reducing its value steadily to zero in order to complete a switch to the US dollar by the end of September 2015. The Zimbabwean government stated that it would credit 5 US dollars to domestic bank accounts with balances of up to 175 quadrillion Zimbabwean dollars, and that it would exchange Zimbabwean dollars for US dollars at a rate of US$1 to 35 quadrillion Zimbabwean dollars to accounts with balances above 175 quadrillion Zimbabwean dollars.
This move was meant to stabilise the economy and establish a credible nominal anchor under low inflation conditions. The exercise brought closure to the outstanding issue on the Zimbabwe dollar, further confirming the government's position that the local unit will not return anytime soon.
On 2 February 2009, a third redenomination took place, in which the RBZ removed 12 zeros from the currency, with 1,000,000,000,000 (third, ZWR) Zimbabwe dollars being exchanged for 1 new (fourth, ZWL) dollar. Therefore, the fourth dollar (ZWL) is equivalent to 10,000,000,000,000,000,000,000,000, or 1×1025 or 10 septillion first dollars (ZWD) (or 1 trillion third dollars).
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Shortly after the Zimbabwean dollar was discontinued, they were purchased as curiosities, or in quantity as novelty gifts, for example to financial advisers' clients to show why they should invest in diverse assets instead of cash, which loses its value over the long term.
The image shows the hyperinflation in Zimbabwe
Coins and Banknotes
In 1980, coins were introduced in denominations of 1, 5, 10, 20, 50 cents, and 1 dollar. The 1 cent coin was struck in bronze, with the others struck in cupro-nickel. In 1989, bronze-plated steel replaced bronze. A 2-dollar coin was introduced in 1997. In 2001, nickel-plated steel replaced cupro-nickel in the 10, 20 and 50 cents and 1 dollar coins, and a bimetallic 5-dollar coin was introduced.
In its 2014 mid-term monetary policy statement, the Reserve Bank of Zimbabwe (RBZ) said it would import special coins, known as Zimbabwean bond coins, to ease a shortage of change in the economy. Like the original 1980 coins, these special coins would be denominated in 1, 5, 10, 20, and 50 cents, but would have values at par with US cents. There would also be South African rand coins of 10, 20, 50 cents, 1, 2, 5 rands.
The RBZ's statement did not specify when or where these coins would be imported from, but a later report on 26 November 2014 clarified that over $40 million worth of these coins were expected to be delivered within the next week from Pretoria. On 18 December 2014, the 1, 5, 10, and 25 US cent denominations were released into circulation. The 50 US cent denomination followed in March 2015. The banknotes of the Zimbabwean dollar were issued by the Reserve Bank of Zimbabwe from 1980 to 2009.
Exchange Rate Dynamics: ZWD to INR
Understanding the exchange rate between the Zimbabwean Dollar and the Indian Rupee requires a look at historical data and the factors influencing it. Here's an overview of the ZWD to INR exchange rate statistics:
| Statistic | Last 7 Days | Last 30 Days | Last 90 Days |
|---|---|---|---|
| High | 3.3804 | 3.3804 | 3.3804 |
| Low | 3.3205 | 3.2908 | 3.2304 |
| Average | 3.3618 | 3.3251 | 3.3028 |
| Volatility | 0.37% | 0.31% | 0.26% |
These figures are derived from mid-market rates, which represent the midpoint between the "buy" and "sell" transactional rates in global currency markets. It's important to note that these are not transactional rates.
The third dollar rates above are OMIR. The cash rate differs significantly to the above rates. 24 January - RBZ caps daily variance of official exchange rate based on volume traded. The ZWD is able to fluctuate (from its average rate) in a daily band of: 0% (under US$5 million); 1% (US$5 to 10 million); 1.5% (US$10 to 15 million); or 2% (exceeds US$15 million).
Redenomination and Exchange Rate History
In the first redenomination of 1 August 2006, 1000 ZWD were exchanged for 1 second dollar (ZWN). The second dollar started off with an official rate of 250 and a parallel rate of 550 to the US$. 1 August: RBZ revalues the Zim dollar. 1,000 Old Zim dollars become 1 revalued Zim dollar. The official exchange rate is set to 250 revalued Zim dollars per 1 US dollar.
A "special rate" of 15,000 ZWD per USD was brought in on 26 April 2007. The improved exchange rate will be applied to miners, farmers, tour operators, non-governmental organisations, embassies, Zimbabweans living abroad that repatriate earnings, and others who generate foreign exchange.
Old Mutual Implied Rate (OMIR)
The Old Mutual Implied Rate (OMIR) is calculated by dividing the Zimbabwe Stock Exchange price of the Old Mutual share by the London Stock Exchange Price for the same share. The answer is the Old Mutual Implied Rate for the Pound.
In the final months before Zimbabwe's central bank reforms of 30 April 2008, virtually all popular currency conversion resources relied upon the official rate of 30,000 ZWD to US$1 for published figures, in spite of the vast differences between that and free market rates. By 23 May 2008, Bloomberg[158] and Oanda[159] began publishing floating rates based on Zimbabwe's formally regulated domestic bank market, while Yahoo Finance started using the updated official rate in July, albeit with a decimal point shift of 6 places. Those reported rates generally reflected the Official Rate as shown in the above table.
Electronic bank transfers (RTGS) were suspended by the Reserve Bank on the 3rd. As of 26 November newspaper reports stated the RTGS was still not operational, and part of the reason was that the Zimbabwean Government had not paid the company responsible for fitting the system.[176]The Zimbabwe Stock Market, and consequently the OMIR, crashed on 20 November when allegations of market manipulation became public.
ZSE chief executive Emmanuel Munyukwi revealed that a large number of multi-quad-, quin-, and sextillion cheques had bounced.[177]Old Mutual has not traded since 20 November, so no meaningful OMIR figures are available.
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