RESERVE Bank of Zimbabwe governor John Mangudya was yesterday coy about the printing of bond notes, only revealing that the surrogate currency will not be printed in Germany, South Africa or Zimbabwe.
By Taurai Mangudhla/Fidelity Mhlanga
As controversy continues to swirl over the bond notes, the central bank governor told the Zimbabwe Independent that a legal instrument for the introduction of the local money would be promulgated by Monday next week.
Mangudya said an independent board tasked with monitoring the printing of agreed amounts of bond notes would only be appointed after the legal framework is in place. However, he would not reveal the exact date on which bond notes are scheduled to begin circulating.
“What I can tell you is that they (bond notes) are not being done in Germany or South Africa. They are definitely being done outside the country,” the central bank chief said.
Some Zimbabweans opposed to the introduction of bond notes were politicking by lobbying countries such as Germany to desist from printing the surrogate currency, Mangudya complained.
He sought to allay fears that bond notes are an attempt to bring back the Zimdollar via the backdoor.
“We don’t want to see even one bond note in the streets. They must all be disbursed through the banks.”
In remarks that could unnerve economic players, Mangudya hinted that the central bank could print bond notes in excess of the US$200 million that was purportedly backed by a regional bank raising fresh fears of hyperinflation and the re-entry of the redundant Zimbabwe dollar.
Zimbabwe, which in 2009 adopted the US dollar as the anchor currency due to an unprecedented economic meltdown, is facing a biting cash crisis triggered by weakening exports and depreciating regional currencies.
To stimulate exports, the central bank has proposed the introduction of bond notes, a surrogate currency that will be a 5% incentive on export receipts.
The RBZ governor said the bond notes are backed by a facility from the African Export and Import Bank (Afreximbank) although details of this arrangement remain murky.
In his mid-term monetary policy statement, Mangudya said the US$200 million is only about 1, 5% of money supply and will have no material impact on the economy.
Mangudya yesterday, however, let the cat out of the bag when he told a Zimbabwe National Chamber of Commerce breakfast meeting that bond notes worth US$200 million will be in circulation by the end of 2017, further hinting that more could be printed.
This is a marked shift to his remarks last month when he said the apex bank would take a measured approach and introduce surrogate currency worth US$75 million by year end.
Asked whether or not the bond notes will cause inflation, Mangudya said: “I have already answered that one. The maximum is 5% of exports. It means you need to bring in foreign currency first into the country before you get the incentive so what comes first is money into the country then you get the incentive. How would the 5% inflate 100%?,” Mangudya said.
“The maximum as we said is US$200 million, now, and that will take us up to end of 2017… Right now the 5% of export incentive is about US$60 million dollars so the amount will be US$200 million by end of next year,” added the central bank chief.
In May, the RBZ announced that the incentive would be discontinued once exports reach the US$6 billion mark from US$1,125 billion registered for the six months to June.
The US$200 million is 5% of US$4 billion. Exports worth US$6 billion require an incentive worth US$300 million.
Mangudya said the bond notes will be introduced in November in small denominations of $2 and $5 to mitigate externalisation and counterfeiting. Public awareness campaigns which will cover features of the new surrogate currency will be held countrywide starting October 31, Mangudya said.
The central bank chief said formation of an independent body to monitor bond notes circulation is being finalised.
Mangudya could not be drawn to disclose the exact date the country will unveil the bond notes and where the currency is being printed on grounds it could fuel speculation.
Questions have been raised over the central bank’s delay in introducing the surrogate currency amid claims the country is yet to secure printers for the currency. Information gathered by the Zimbabwe Independent has cast doubt over the availability of the US$200 million facility from Afreximbank given the absence of terms sheets for the facility.
The bond notes, the central bank said, were meant to ease cash shortages, plug externalisation and money laundering after it reported that nearly US$2 billion was siphoned out of the country last year.
Mangudya yesterday however said the term sheets where in place and that Zimbabwe was fully backed by the Afreximbank facility.
“Some lawyers were embarrassed when I showed them the term sheets,” Mangudya said, adding, “Afreximbank has an exposure of close to a US$1 billion in Zimbabwe to help you and me. Afreximbank helps you and you abuse them. Banks are stable because of Afreximbank under the Afreximbank Trade Debt-backed Securities (Aftrades) and US$150 million in Zesa.”
Commenting on international payments, Mangudya said Afreximbank on Monday disbursed US$150 million under Aftrades to stabilise the country’s nostro accounts.
In 2014, Afreximbank extended a facility to the private sector in Zimbabwe. Aftrades is a US$100 million facility and associated instruments aimed at alleviating the liquidity challenges confronting the financial sector in Zimbabwe.
Consumer Council of Zimbabwe Director-general Rosemary Siyachitema buttressed fears held by the public saying consumers were skeptical about bond notes but had no choice since it was government’s decision.