Zimbabwe — Those FCA Credit Deposits are not real US dollars

You cannot simply create foreign currency. You earn it. You cannot print foreign currency. No. It doesn’t work that way.

You can go ahead electronically printing fake US dollars until we get to a point where we have to separate the goats from the sheep. It’s Deja Vu. We have been there before.

What is Real and what is Fake?

This is the first question Mthuli asked when he was appointed Finance Minister. At that point, we all agreed that the USD 9.5 billion sitting on the RTGS payment system was not real USD. We then agreed to call it something else. For lack of a better term, we ended up referring to those fake USDs as RTGS dollars. We gave it the name of the payment system that it was residing on (The Real-Time Gross Settlement System).

To answer the question, of what is real and what is not, we decided to only consider foreign dollar-denominated liabilities. These were given the name Legacy Debts and are also referred to as Blocked Funds. Commercial banks flipped through their books and registered these true USD obligations with the Exchange Control Division at RBZ. These liabilities were shifted from commercial banks to RBZ and from there to the Central Government. The value was at first said to be USD 1.2 billion. A couple of years later we have seen the legislative framework for this giving a value of USD3.3 billion. It has since reduced to USD2.9 billion as of December 2020, and USD2.1 billion as of April 2022.

The criteria for identifying what is real is simple. It has to be able to buy goods and services outside of Zimbabwe. If it cannot buy outside of Zimbabwe, then it is not a foreign currency at all.

What buys outside is that which is recognized outside of Zimbabwe. There are only two types:

  1. Cash USD
  2. Real Nostro — Balances held by banks outside of Zimbabwe

You cannot print your own USD cash in Zimbabwe, it will be duly regarded as a counterfeit note. You cannot print electronic balances with banks outside of Zimbabwe. You cannot command Stanchart New York and Commerzbank to add digits to your accounts with them.

As of now, we have USD1 billion worth of real USD (cash USD + real Nostro), yet we have USD1.8 billion worth of FCA deposits. We are electronically printing our own version of the USD, which is simply RTGS 2.0.

Reuben is fooling us.

Many would want RBZ and the Ministry of Finance to be the main culprits on this one. The culprit is actually Commercial Banks.

Rueben Maiwe, a Loans Officer at First Commercial Bank of Zimbabwe (FCBZ) is inadvertently fooling us. He is the problem, unknowingly. Reuben processes loan applications from clients. He and his accomplices from the Middle Office (Risk Department) approve USD loans. They create USD balances from thin air. They invent FCA balances.

Once a USD loan is approved, they go ahead and create two accounts in their books. They create an FCA loan account for the client. This account is the loan that the client owes the bank. It is an asset to the bank.

If the client does not already hold an FCA account (transactional account), they open one for him. This account is for funds that belong to the client, that he can use as he wishes. It is a liability of the bank.

So, Reuben is creating an asset and a liability at the same time. The example below is for USD800, created out of thin air.

Creation of an FCA Loan and an FCA deposit

The accounting entry is as follows: Dr Loans and Advances, Cr Deposits.

This is how money is created from the credit process by commercial banks. This is totally okay for our own currency, the ZWL. It’s totally not okay because it is being done for USD as well.

The person who benefits from this loan might proceed to use the FCA deposit in his account to pay for his kid’s school fees abroad or might simply withdraw cash USD. Whose money is it that he is using? Its funds that belong to someone else. When that someone else comes to the bank to withdraw his cash or to make a payment abroad, there will not b enough funds for him so. he will be the bagholder, left holding the bags with meaningless electronic balances whilst the real USD is long gone.

The problem with the scam that Reuben is running is that, by creating FCA deposits, via credit extension, he creates balances that can lay claims to the real USD. That is how we ended up with USD9.5 billion laying claims on a couple of billion real dollars. That is how we are currently having FCA 1.8 bn laying claims on USD1.1 billion real USD.

Clearly, Reuben is fooling us, again.

Who is to Blame for our Monetary Mess?

Yes, the bankers are printing electronic USD balances, but they are not the sole cause of our problems. Our problems are complex. The emphasis I am placing on the bankers is due to the fact that they have often been exonerated from being part of the mess.

Commercial Banks have often been regarded as victims in this whole thing. They are not victims. They are perpetrators. They are playing their role in contributing to the monetary mess. The pic below places the banks and their role within a wide context.

Zimbabwe’s problems contributing to the monetary mess

All economic players are contributing to the mess.

  1. Government — Ministry of Finance — Budget Deficits
  2. Central Bank — RBZ — Monetizing Everything
  3. Commercial Banks — FCBZ — Printing electronic USD
  4. Business — Outscor Group — Trade Deficits

If the government collects some revenues in foreign currency, let’s say USD 900m and yet it spends USD 1.5 billion in a fiscal year, where does the other USD 600m come from? It’s either borrowed, “stolen/confiscated” from exporters, or printed into existence if it’s meant to pay domestic contractors. This is a big source of the mess. Mthuli claims he has Budget Surpluses but does he have a surplus on the USD part of his budget? He is incurring some expenses in USD. Budget deficits have long been regarded as the mother of all the monetary messes we find ourselves in.

If our businesses export USD 6 billion and import USD 7 billion worth of goods and services in a year, where are we going to find the other billion? Trade deficits have been duly recognized as a foreign currency drainer. Trade deficits are problematic, especially if they are perennial because even if you have reserves of USD5 billion, if you are running a deficit of a billion every year, you drain your reserves within 5 years.

If commercial banks have only a billion worth of real USD but create $800m more, we have a problem that contributes to the monetary mess. Reuben Maiwe, the Loans Officer, approving a loan of USD1 m to the Outscor Group is running a Mazoe Dilution scam that we used to run when we were kids. Our mom would eventually find out that the real drink is gone, it’s mostly colored water in the bottle now.

The central bank is at the center of our monetary mess. It has to monetize budget deficits from the government. It has to accommodate the central government’s needs for real forex as well as fake forex. It has to come up with clever and not-so-clever ways of managing the trade deficit situation. It has to appease local producers by trying its level best to make sure that they can obtain some real foreign currency to import items that are critical to the production processes. It has to spoil the business babies demanding cheap forex. The central bank again has to sit with all the mess (Mazoe Dilution scam) created by the kids (commercial banks). The central bank is a parent overburdened with responsibilities from the kids (commercial banks), the cousins and siblings (businesses), and its own parents (the government). It’s something similar to the so-called “black tax”. The central bank ends up monetizing everything (the twin deficits, legacy debts, forex market losses).

Isn’t the central bank somewhat of a victim in this? Yes, it is a victim. Yet, it is not entirely a victim, things are not that black and white.

The Liar, The Thief, and the Lying-Thief

A thief steals. A liar does not tell the truth. Oftentimes, a thief is a liar, and a liar is a thief.

Mthuli Ncube is a liar. He lies a lot. But he is not a thief. Mthuli Ncube is not a thief. To say Mthuli Ncube is a thief would be lying. I would understand that claim though if it is coming from an anarchist who believes that all taxation is theft, especially very high taxes.

Mthuli is lying that he has real surpluses. He is hiding deficits in two ways: 1) accounting tricks and 2) running schemes that bypass the central government. Mthuli is firstly hiding behind the effects of inflation. He is hiding USD budget deficits by presenting his budget in combined ZWL figures. If he presented a USD budget and USD results alongside with ZWL budget and ZWL results, we would be shocked by the size of USD budget deficits.

Mthuli and his central government do not necessarily budget for government schemes that are absorbed and accommodated directly at the RBZ. Economists tend to call these “quasi-fiscal” activities but there is nothing quasi about them. They are fiscal activities. Fullstop. Klaar. Most of the country’s key commodities have fiscal schemes that are run by the RBZ. Gold, tobacco, cotton, at times wheat, and recently grain.

Mangudya is mostly a thief. He is not really a serial liar. He might be guilty of Lying by non-disclosure but he is not an outright liar. He is a thief though. That forex allocation scheme is stealing real forex from exporters and then auctioning the forex to approved importers. He also steals from everyone by monetizing everything. He runs to the printer to address any little spot of bother in the economy. Wanton printing of money steals from the current holders of monetary balances. Money is a property. Diluting it via excessive issuance is stealing property via the back door.

Reuben Maiwe, on the other hand, is a thief and a liar, and he doesn’t know about it. And many people don’t know about it. Rueben is our Loans officer who creates fake electronic USDs. Reuben lies regarding the true nature of the balances he creates. Surely, these cannot be proper US dollars. He insists they are US dollars, and he continues to open more FCA accounts to add more digits and perpetuate the scam. This scam dilutes the real foreign currency. This is essentially stealing from those who have deposited real foreign currency, i.e., those with balances of real foreign currency in their FCA accounts. These are people who received funds from abroad or those who deposited cash USD into these FCA accounts. Unlike the ones who got deposit entries created via the lending process. Reuben is a Thieving Liar. He is a Lying Thief.

Rueben managed to fool all of us. Ndiye tsuro magen’a.




Financial Analyst, Cloud Accountant, Citizen Data Scientist, FPL Boss

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Ryan Gosha

Financial Analyst, Cloud Accountant, Citizen Data Scientist, FPL Boss