Last man standing RwandaAir, ditches local money

As forex challenges mount for Zimbabwe, regional airliner Rwanda became the latest and final major airline to suspend ticketing of local sales in RTGS and bond notes.

RTGS is a term referencing Zimbabwe’s electronic balances which are barely backed by any cash, while bond notes were introduced as an export incentive in 2016. Zimbabwe’s monetary regime holds that the USD is equivalent in value to the local alternatives mentioned above.

In a normal economy, this would imply a fixed exchange rate regime which typically negatively affects the smooth flow of production among other consequences.

In a statement on Tuesday, RwandaAir said it is withdrawing ticketing Zimbabwe system from Zimbabwe and accepting only internationally issued credit cards.

 RwandAir joins other major airlines that have since ditched the RTGS/bond for the US Dollar. Other airlines have already moved to USD exclusive ticketing as early as 2018 and these include Emirates and SAA.

These airlines, like any other creditor or supplier to Zimbabwe have been facing challenges in accessing their ticket sales in forex. It is the obligation of the Central Bank to convert the RTGS  payments made to airlines into forex, as per the 1:1 official exchange rate.

The bank has however been over whelmed for close to 3 years now, as export receipts come short of matching imports leaving a wide trade gap. The predicament has been further gravitated by a growing money supply which has capacitated Zimbabweans with additional money to demand goods and services.

As at November it was established that Zimbabwe owed airliners $139 million in outstanding settlements and late in December, Fast Jet a regional airliner, said it was on the verge of collapse owing to a $1.75 million held in Zimbabwe among other cashflow challenge.

Despite the huge cost to the government through subsidization of imports and such service as flights and the industry at large, Zimbabwe government insists on maintaining the 1:1 exchange rate.

In December, Fast Jet, a regional airline with operations in Tanzania, Zambia, Mozambique, South Africa and Zimbabwe could not access US$6,4 million tied up in Zimbabwe owing to foreign currency shortages in the country resulting in working capital hiccups in  their operations.

– Equity Axis News

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Equity Axis is an online financial media service platform focused on African markets offering real-time stock quotes, news, analysis and data.

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