Bond coins are necessary: Mangudya

HARARE - The introduction of bond coins was a “confidence-building measure” after the hyper-inflationary and pre-dollarisation era’s “financial trauma”, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said.

The Central Bank boss was speaking at an Institute of Chartered Accountants Zimbabwe (Icaz) breakfast meeting yesterday where he stated that a “measure of resistance” to the new initiative was anticipated.

“…it is an issue of trust and confidence. We are introducing the coins as a gradual measure to regain confidence and trust from the market, so yes resistance is very natural and expected, but let us not live in the past,” Mangudya said.

This was after the Harare meeting had quizzed the governor on the policy rationale — a move also in motion in Ecuador and Panama — and with the executives almost expressing doubt or uneasiness on market preparedness.

However, the former CBZ Holdings Limited chief executive said that they expected the negative sentiment or pessimism to taper off or subside with time and as the market warms up to the idea.

Crucially, Mangudya told the accountants to relax as government had “no intention to defraud Zimbabweans of their hard earned cash” through this monetary initiative.

“The problem is that Zimbabwe is a financially-traumatised society. It is as bad as (a violated) individual, but please relax,” he said, adding the operations would be kept at below 5 percent of total money supply.

The new coins, which went into circulation yesterday, are worth $10 million and thus translating to an inconsequential two percent of total banking deposits of approximately $5 billion in circulation.

Mangudya acknowledged “people’s fear about the Zimbabwe dollar’s return and, hence, the need to guard against this”, but fundamentals were not ripe for this.

Crucially, he said the coins would not help fix the country’s liquidity problems, but were simply meant to establish market confidence.

“The fundamentals are not yet right (for the local currency return), but Zimbabweans must be more worried about poor governance issues (such as corruption) than bond coins,” the former bank executive said.

The special coins of 1c, 5c, 10c and 25c are part of a five-year $50 million bond, which government has secured with a foreign lender and are only useful in Zimbabwe.

At least 30 million rand worth of coins would also be imported to augment the programmes.

After ditching the Zimbabwe dollar in favour of foreign currencies in January 2009 after hyper-inflation had reached 500 billion percent, Zimbabweans have generally been sceptical about the government’s financial motives.

But like Ecuador and the Panamanian balboa — countries that have also dollarised — the special coins have the same value as the greenback.

For their daily transactions, Zimbabwean businesses mainly use the American dollar and South African rand, but usually round-off prices and give consumers vouchers or sweets due to a critical lack of coins.

 

Comments (11)

W ell said Governor but coming late this trust you referred to surely takes a bit of time to achieve. Your office should have taken this awareness compaign about the introduction of these bond coins so that by now everyone would have been prepared to accept them as useful and helpful in alliviating the change issue. By keeping everyone guessing increased the resistance of otherwise a noble idea with good intentions and motives.

goodlife - 19 December 2014

Never trust these ex-CBZ CEOs...he said it...gradual return of the Z$. I bet some orkes are busy minting their fake special coins and use them to gradually wipe out the real US$...overtime guys to make jigs to mint coins and go round the country changing them to US$..Kikikikiki

Garikayi - 19 December 2014

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GA - 19 December 2014

People in Zimbabwe have no confidence and trust in the monetary authorities because they do not tell them the truth. It is well known the world-over that goverments make money in printing and minting money. So why not tell the nation that in addition to providing change convenience monetary authorities will stand to gain through seinoirage. Why are authorities hiding this fact? It just makes the public suscipicious of the introduction of these coins.

Obsever - 19 December 2014

If a thief kisses you please count your teeth

John Shava - 19 December 2014

Please Governor stop lying to us, what confidence building are you talking about today. The introduction of coins should have been done in 2012. in 2014, coins were never a challenge, Akatowandisa hatizive munotenga mashop ekupi. lets be realistic leaders. make us appreciate these coins than forcing us to use them, Dialogue is key in policy implementation. Concerned citizen

augustine savanhu - 19 December 2014

Where is Dr Zeroooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo

Tjingababili - 21 December 2014

For too long, the people of Zimbabwe lived in fear due to misinformation as well as lack of information. There is nothing inherently wrong with the Zimbabwe dollar. The stability of the US dollar is not attributable to some instrinsic character inherent in it. Instead, the speculation and fears peddled by among others the media and critics of the current regime fuel the mistrust of the recently adopted coins. Zimbabweans still need to learn to seperate issues. The credibility of currency depends on a number of factors among them the attitudes of the users. Media comments that are not properly researched and which are overly sensational have a tendency to stifle development. Zimbabweans must break with the past at some point and face the reality that maintenence of national currency is an inescapable reality of sovereign statehood. At some point, the national currency has to return and it might as well be now.

Philani Lithandane - 22 December 2014

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