The Reserve Bank of Zimbabwe (RBZ) claims it is aware that bond notes are now being sold in Mozambique, Zambia and South Africa and this has contributed to the unyielding cash crisis in the country, a tacit admission of failure, as the central bank always claimed the surrogate currency will only trade hands within Zimbabwe’s borders.
RBZ deputy governor, Kupukile Mlambo told participants at an international retailers’ indaba hosted by Confederation of Zimbabwe Retailers (CZR) in Harare yesterday that the central bank was surprised to learn from its staffers and bankers that bond notes were being found across the border.
Mlambo suggested cross border traders were responsible for taking bond notes across the border, which he bizarrely said were a more “stable” currency compared to the South African rand. Cross border traders are estimated to be spending $1,15 million daily buying their wares.
Financial expert, Persistence Gwanyanya, said bond notes were being found across borders due to their parity with the United States dollar.
Government is working on a plan to establish a gold reserve set to anchor the introduction of a local currency when the right time comes for the return to the Zimdollar, it has been learnt.
This comes at a time when the country is grappling with cash shortages and economists believe the issuance of a gold backed local currency would help stimulate economic activity.
Modelled around the $200 million Afreximbank facility, which is backing the current bond notes in circulation, economists believe the local currency will ease liquidity challenges and stimulate aggregate demand.
Plans to create a gold reserve involve investing in the efficient operations of Government’s gold mining firms, including Sabi, Elvington and Jena gold mines.
Sabi Gold Mine resumed operations recently with targets to produce about 25kg of gold per month after a five-year hiatus caused by working capital constraints.
Mines and Mining Development Minister Walter Chidhakwa said the gold reserve would complement the Sovereign Wealth Fund, where a set of minerals would be reserved for future generations.
The legal processes that will give effect to the fund are still before Parliament.
The Reserve Bank of Zimbabwe has dismissed social media fabrications that it is introducing higher bond notes denominations of up to $50 describing such information as malicious falsehoods.
Yesterday social media platforms such as Facebook and Twitter were abuzz with reports that the central bank is introducing $10, $20 and $50 bond notes, prohibiting use of MasterCard, Visa Card and Maestro outside the country and rapping certain Government departments over failure to bank cash.
RBZ Governor Dr John Mangudya warned the public not to follow such unfounded and malicious reports.
“These statements are false and should be treated with the contempt they deserve. The bank (RBZ) dismisses the statements in their entirety as false, irresponsible, mischievous and malicious as the Governor nor any officer of the bank has held any such press briefing or made the statements as alleged,” said Dr Mangudya.
He said the the statements were not only false but dangerous as they were calculated to cause alarm and despondency within the economy.
There are fresh fears that the country’s dying economy is hurtling towards the debilitating depths of the 2008 hyperinflationary era, as bond notes are now also disappearing from the market.
This comes as United States dollars have almost completely disappeared from the formal market — with the coveted greenbacks now only easily available in the thriving black market.
It also comes as the Reserve Bank of Zimbabwe (RBZ) has ruled out injecting more bond notes into the market, arguing that Zimbabwe’s worsening cash crisis will only improve when the country’s production and export performances improve.
In the meantime, the disappearance of the country’s surrogate currency from the market is forcing banks to give desperate Zimbabweans their cash in coins.
The RBZ introduced bond notes at the end of last year to ease the country’s severe cash shortages, but so far this has failed to satisfy the market’s cash needs.
This has seen banks limiting the amount of money both individuals and companies can withdraw to as low as $20.
So bad has the situation become that desperate customers are also now having to make do with sacks of coins when they withdraw their money.
STREET vendors are turning to cash dealing as the search of the elusive United States dollar continues to intensify, amid growing shortages.
Vendors are now aiming at selling a higher quantity of goods at a cheaper price especially chocolate bars and small packets of chips.
For example, Pascal chocolate bars are being sold for $1 for four against the market price of $0,50 each. A small packet of chips is being sold at $1 for three against a market price of $0,50 per packet.
After the vendor receives the cash in United States dollars they sell it in exchange for bond notes and use it to buy a higher quantity of their goods. If the cash comes in bond notes, they buy dollars and sell it at a higher mark-up to cover the loss made on their product while also including their profit margin.
Selling cash comes with a 20% to 30% mark-up.
THE Reserve Bank of Zimbabwe says the ratio of cash to deposits in banks has come down from a high of 43,5 percent in 2009 to just under 5 percent, with electronic transfers picking up the huge difference as most retailers now get most of their payments by swipe card and banking App transfers.
RBZ deputy governor Kupukile Mlambo told delegates at a business conference at the Zimbabwe International Trade Fair yesterday that as Zimbabwe moves towards a near total electronic transfer market only 2 percent of banks’ liquid assets were in banknotes and coins.
However, the move towards a pure electronic economy is hampered by the fact that few rural retailers can cope outside a cash economy, with networks not always working, and many informal small traders probably need cash. Even ordinary urban people usually need a trickle of cash for combi fares and the like although mobile money could take a greater share of these transactions, as they do in Kenya.
Former Industry and International Trade minister Nkosana Moyo has slammed bond notes, arguing the surrogate currency is “not the answer” to the country’s deepening cash crisis.
“The answer is not bond notes,” Moyo said in an interview with Capital26free, a podcast network station.
The respected economist — famed for publicly speaking out against attacks on businesses and factories by war veterans and later uncharacteristically resigning from President Robert Mugabe’s Cabinet about a year after his appointment — said “the answer is to stop the haemorrhage of where our money went and continues to go. Once we stop that, the issue of bond notes will not even arise”.
“ . . . somebody is responsible for our money disappearing from the banks and they need to give us an honest answer,” Moyo said.
“When we dollarised, we literally — all of us without exception — zeroed our savings to nothing. So every single dollar that is in my account, I earned from that day onwards . . . where did it go?” he queried.
“The starting point is you need to ask the banks, because the banks have not been honest with us, where did our money go? Because if I put my money in the bank and it’s not there, it must have gone somewhere. It’s either the bank lent that money recklessly and lost it; or they gave it to somebody else. They need to account for it and that’s our starting point,” Moyo said.
THE International Monetary Fund (IMF) says Zimbabwe requires a comprehensive policy package to retrieve the economy from the woods, instead of seeking salvation in bond notes.
IMF African Department director, Abebe Aemro Selassie told journalists on Sunday that a holistic package of reforms was needed to get Zimbabwe out of the crisis.
“There’s a limited amount of foreign exchange inflows coming in and no monetary policy tool. So, they are in a difficult circumstance right now. We think that, going down this one [bond] note route, in and on itself, will not address the challenges that the country has.
So, it’s very important to have a more comprehensive policy package, which also addresses a lot of the fiscal challenges that the country faces, a lot of the structural reforms that have to be done,” he said.
Selassie had been asked to comment on the bond note concept.
DESPITE ever-growing demand for cash, the Reserve Bank of Zimbabwe says it will not immediately issue new bond notes to add to the US$121 million in value already in circulation
At the beginning of the year, monetary authorities forecast local cash supplies would improve with the start of the tobacco marketing season and on the back of recovering commodity prices on international markets.
But cash hoarding and externalisation are putting paid to that. RBZ Governor Dr John Mangudya told The Sunday Mail Business last week that the cash currently in circulation — US$900 million and US$130 million worth of bond notes — was sufficient for local transactions.
“As for now, we have decided not to continue issuing out new bond notes into the market as we have enough for transactional processes … We shall (avail more bond notes) when people have fiscal discipline with the money that is available.
“Since last year March, we have suffered due to some detractors who have bad intentions of hoarding and externalising cash in a bid to destabilise our recovery framework , but we won’t fold hands to leave them to do as they will.
“To deal with such bad characters, we have brought into play (the) Bank Use Promotion Act to ensure and encourage people like traders, wholesalers and other dealers to bank their money. And from this legal instrument, we have taken to court over six firms since the start of the year and we shall continue doing that until the people have discipline,” said Dr Mangudya. Authorities say businesses account for much of the indiscipline plaguing the market as civil servants, while accounting for US$200 million in salaries monthly, have little disposable income.
Reserve Bank of Zimbabwe governor, John Mangudya, has filed an application at the High Court to have the matter challenging the legality of bond notes dismissed.
Mangudya has been taken to court together with President Robert Mugabe and Finance minister Patrick Chinamasa by Combined Harare Residents’ Association director, Mfundo Mlilo, challenging the introduction of the bond notes and the law relating to the same.
“The matter should be dismissed for want of prosecution, as clearly, there is absolutely no serious intention by Mlilo to bring the matter to finality,” the affidavit read.
Mangudya said Mlilo’s application had no prospects of success because his founding affidavit was fatally defective because it had no date.
He also submitted that Mlilo wasted time by filing an unfounded application and had consequently incurred unnecessary legal costs opposing an application, which he did not intend to fully prosecute.
Mlilo had earlier challenged the use of bond notes, saying they were worthless paper.
US$900 million in cash and bond notes/coins worth US$136 million are circulating in Zimbabwe; but fiscal indiscipline — principally hoarding and externalisation — continues to curtail market liquidity, a Reserve Bank of Zimbabwe study has established.
RBZ data also shows that bank deposits increased from US$6,14 billion in September 2016 to US$6,51 billion last December on the back of reduced grain imports, increased Diaspora remittances and remarkable export growth.
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