IN his desperate defence of the introduction of bond notes, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya shocked the market when he told bankers and journalists attending the Monetary Policy Statement presentation last month that no referendum had been conducted to confirm public resistance to the surrogate currency.
Zimbabwe Independent Comment
The RBZ chief — who was clearly becoming emotional when quizzed about the legality of bond notes and the lack of a term sheet between the central bank and the African Export and Import Bank which is supposedly backing the bond notes with a US$200 million facility — would not explain convincingly why the government has embarked on this path.
And just last week, he told this paper that details pertaining to the Afreximbank facility were not for public consumption.
Pensioners lost life savings when government ditched the useless Zimbabwe dollar for a basket of foreign currencies dominated by the greenback in 2009. Naturally, a wide cross-section of Zimbabweans are worried about the impending bond notes.
Panic withdrawals, sparked by fears over the introduction of the surrogate currency, could result in a run on banks — with catastrophic consequences. Questions have been asked on the timing, legality as well as the terms and conditions around the widely reported, but largely unexplained US$200 million Afreximbank facility which purportedly backs the bond notes. But no one has answers.
What is true, though, is that critical sectors have expressed reservations on the bond notes. The banking sector, for instance, has opted for the extensive use of the rand, arguing that the strengthening United States dollar is hurting domestic exports.
Ordinary Zimbabweans are also sceptical.
But it appears government cares less. The opaqueness and suspicion around bond notes has also affected Zimbabwe’s reengagement efforts with multilateral financial institutions such as the International Monetary Fund (IMF).
After failing to apprise the IMF during the fund’s meetings in May over the bond notes, government has been shooting itself in the foot over the monetary issue. But Zimbabweans will bear the brunt of this incompetence, bad policies and corruption.
While the apex bank insists that bond notes will have no inflationary impact, conflicting statements within the same government have only served to stoke confusion.
Vice-President Emmerson Mnagagwa last week said government wanted a currency that it would control, suggesting that bond notes would not only ease the current cash crunch but would be the best option for President Robert Mugabe’s government to fund its bloated wage bill and oil its patronage system.
For an institution critical in establishing and sustaining market confidence, the central bank has dismally failed to market bond notes and stem the tide of negative opinion. That can only further hurt the economy which is now projected by the World Bank to slide into recession despite ambitious government estimates.