Foreign diplomats accredited to Zimbabwe on Wednesday quizzed Reserve Bank of Zimbabwe governor John Mangudya over contentious issues surrounding bond notes amid a growing public outcry over the controversial promissory currency, it has been established.
Bernard Mpofu/Elias Mambo
Zimbabwe is later this month expected to introduce bond notes — which will circulate locally only — to ease a severe cash crisis triggered by declining exports and externalisation.
The bond notes are ostensibly a 5% incentive on exports, which human rights groups and social movements have rejected as a government ploy to re-introduce the defunct Zimbabwe dollar through the back door.
Treasury ditched the local currency in 2009 and demonitised it last year for a basket of foreign currencies dominated by the United States dollar due to an unprecedented economic meltdown characterised by hyperinflation and destruction of wealth.
Social movements such as the National Vendors’ Union of Zimbabwe have threatened to stage demonstrations in the capital today in protest against the introduction of bond notes, corruption and an economic downturn.
Diplomatic sources told the Zimbabwe Independent that the dean of Harare’s diplomatic community, who is also the Democratic Republic of Congo ambassador to Zimbabwe, Mawampanga Mwana Nanga, organised a meeting with the central bank chief ahead of the injection of the bond notes by month-end.
During the meeting, Mangudya reportedly faced a volley of questions as diplomats sought clarity on the US$200 million Afreximbank facility backing the introduction of bond notes, where the surrogate currency is being printed and how exporters will benefit.
“We had a meeting with the central bank governor and the agenda was the bond notes and market confidence. This meeting was organised by the dean of the diplomatic community and it lasted just over two-and-a-half hours,” said a Western diplomat who spoke on condition of anonymity.
“The governor reassured (us) that the bond notes will not be available through ATMs (automated teller machines), but over the counter. He said depositors will have an option to request for hard currency. He further said 5% incentives will be transferred through the RTGS (Real-Time Gross Settlement) to exporters, meaning that the market will not be immediately flooded with the bond notes.”
Another diplomat said that during the meeting one of the ambassadors asked Mangudya to consider persuading banks to have two ATMs — one for US dollars and another for dispensing other currencies to ensure that depositors have a choice on which currency they want to use.
Mwana Nanga could not be reached for comment at the time of going to print.
Concerned with planned protests, Mangudya this week told the Independent that the bond notes would be drip-fed into the market. He has, however, kept a tight lip on where the bond currency will be printed, fuelling market speculation that they could be printed locally and this may stoke inflation which has in recent months been trending upwards.
“To ensure that we manage market sentiment, we have come up with smaller denominations of the bond notes. By month-end we are going to be drip-feeding the bond notes into the market and we will continue importing the United States dollar,” Mangudya said.
A fortnight ago, the central bank rolled out a publicity campaign ahead of the introduction of the bond notes that has seen newspaper, radio, television and online platforms promoting the notes as an export incentive.
Mangudya said the second phase of the campaign, which would highlight the security features, would start in the coming week.
The central bank said the bond notes would be brought into circulation at the end of November and a measured approach will be adopted to gradually increase the total stock of the surrogate currency to about US$75 million by year-end through lower denominations.
Sources said the RBZ chief also assured the diplomats that investors and international airlines operating sales offices in Zimbabwe would not be hampered from repatriating their funds as a result of the bond notes.
Last month, the Independent reported that a German company, which specialises in the printing of banknotes, Giesecke and Devrient, had rejected Zimbabwe’s request to print bond notes for the cash-strapped Treasury, prompting the desperate government to renegotiate the printing of the notes.
Conflicting statements by officials on the introduction of bond notes have heightened public anxiety on the potential pitfalls posed by the surrogate currency. Finance minister Patrick Chinamasa last month brewed a shocker when he claimed counterfeit bond notes were already in circulation, dampening market confidence. Mangudya sprang into action, defending the bond notes as he sought to re-assure the public that the surrogate currency would be printed outside the country under a watertight process.
Amid a rapidly deteriorating economy and rising social unrest over cash shortages that have seen people sleep in bank queues, Zimbabwe Defence Forces commander General Constantino Chiwenga last month ordered the military to embrace the controversial bond notes set to be introduced this month despite growing discontent over the surrogate currency.
Just this week, the Zimbabwe Lawyers for Human Rights approached the High Court seeking an order to stop the introduction of bond notes as the number of those challenging the controversial currency grows by each passing day.
In September, the Constitutional Court threw out Zimbabwe People First leader Joice Mujuru’s case with costs, dismissing it as premature and speculative.
To avert a looming legal crisis over the bond notes, President Robert Mugabe on Monday invoked the Presidential Powers (Temporary Measures) Act, gazetting Statutory Instrument 133 of 2016, giving effect to the introduction of bond notes.