Government’s controversial bond notes — a promissory local currency — will start circulating in the market within the next two weeks after being distributed to local banks, Reserve Bank of Zimbabwe (RBZ) deputy governor Kupukile Mlambo said this week.
By Fidelity Mhlanga
The apex bank in May mooted the introduction of bond notes which are to be paid to exporters as an incentive of up to 5%. The bond notes, according to central bank governor John Mangudya, are backed by a US$200 million Afreximbank facility which was made available to Zimbabwe in April this year.
The central bank deputy chief said the introduction of bond notes in two weeks’ time was also a measure to curb the externalisation of the US dollar, with official figures released by the RBZ in December last year showing that about US$2 billion was externalised.
“This bond note must be fully backed by the US dollar. I can confirm to you that it’s coming in the next two weeks or so. We are going then through the banks, not in the streets,” said Mlambo at the Insurance Institute of Zimbabwe (IIZ) conference in Victoria Falls.
Mlambo said issued bond notes will not reach US$200 million due to the need to meet printing costs, among other services.
“In fact, I don’t think we will reach US$200 million, maybe US$150 million or so because of the printing costs and other services,” he said.
He added that the central bank is aware Zimbabweans do not have confidence in the RBZ’s intentions due to the traumatic experiences of 2008. In 2008, Zimbabweans lost money and value due to hyperinflation. Their Zimbabwe dollar bank balances, which were demonetised recently, amounted to nothing.
Mlambo allayed fears bond notes will be printed in excess of the US$200 million, saying the central bank was mindful of the risks associated with local currency introduction and the need to monitor money supply.
The deputy governor said only US$15 million worth of bond coins are in circulation to date despite the facility for bond coins being worth US$50 million.
“I don’t want to say we are honest people, but in 2008 I wasn’t there; Mangudya was not the governor as well. I think people should give us a chance,” he said.
According to Mlambo, Zimbabwe should have picked the South African rand as its major currency given that it mostly trades with South Africa.
“We should have picked a currency of a country we trade with most. We are trading in rand and pricing is in United States dollars. With the strengthening of the US dollar, commodities are more expensive when they arrive here which makes us less competitive,” he said.
Speaking on the sources of liquidity, Mlambo said exports were contributing 60%, diaspora remittances 28%, external loans 6% and foreign direct investment injecting a mere 5%in the country.
Mlambo bemoaned the softening of the British pound and South African rand against the US dollar, saying they remain the two countries which are major sources of remittances in Zimbabwe.
He said the tobacco marketing season, though short, was very critical in addressing the cash needs in the country.
Last Friday, Mangudya said the tobacco season was essential in servicing the country’s nostro accounts, adding farmers will get a total of US $29 million through the 5% export scheme.