RBZ's Mangudya allays bond notes fears

HARARE - The Reserve Bank of Zimbabwe governor John Mangudya yesterday said the introduction of bond notes will not result in food shortages or an increase in inflation.

Mangudya said the currency, set to start circulating early next month, was aimed at boosting exports and subsequently grow the economy.

“The issue is about the economy and not bond notes,” he told delegates attending a breakfast meeting organised by the Zimbabwe National Chamber of Commerce in Harare.

“Zimbabwe is facing many challenges including current account deficit, lack of fiscal space and lack of access to foreign finance…hence the need for an investment-led growth to counter these challenges,” he said.

In the grip of its worst drought in a quarter century that has left over 5,5 million people facing food shortages, Zimbabwe is also running out of cash, forcing the central bank to impose limits on imports and withdrawals from banks.

However, there have been fears that central bank’s plan to introduce bond notes to ease the dollar shortage could open the door to rampant money printing, as happened in 2008 when inflation hit 500 billion percent, wiping out people’s savings and pensions.

To deal with such fears, Mangudya said the RBZ will only introduce bond notes in smaller denominations of $2 and $5 to hedge against inflation and build people’s confidence in the currency.

The bond notes, backed by a $200 million Afreximbank facility and pegged at par with the United States dollar, are also expected to reduce illicit financial inflows which had become rampant following the collapse of regional currencies due to a fall in commodity prices and a strengthening of the greenback.

Speaking at the same occasion, Consumer Council of Zimbabwe executive director Rosemary Siyachitema said people were sceptical of the new currency and wanted assurance that the economy will not slide back into the hyperinflationary period.

“We interviewed about 300 consumers and they expressed fear of being impoverished again. We lost a lot of wealth and became poor because of the policies that were made,” she said.

Mangudya, however, dismissed talk of a return to the local currency as “unfounded rumours” and indicated that it was imperative for the country to implement investor friendly policies to lift domestic production.

“We have assured the public before and we would like to continue to do so that the country’s economic fundamentals do not support the return to the Zimbabwe dollar. The multi-currency system is here to stay,” he said.

Zimbabwe has since January 2009 used foreign currencies including the US dollar, British pound, Chinese yuan and South Africa Rand among others after dumping its own currency that had come to symbolise a decade of economic collapse.

The roots of country’s economic malaise can be traced back to 2000 when President Robert Mugabe introduced a controversial land reform programme that led to the forced seizure of white-owned farms.

Since then the country has been blighted by political and policy instability, while its infrastructure has crumbled.

Comments (2)

it is important that at this crucial moment the RBZ governor furnishes the nation with proof that Afreximbank are guarantors of this project. For transparency sake the governor must provide the agreement,contract or MOA with the details on how the said Afreximbank is coming into this issue. What are terms of the guarantee. What is the obligations expected of all parties to this deal etc. What do the people do in the event the project fails as happened previously and many other questions. The media is doing us diservice. Get all this information please.

mam - 29 October 2016

Mangudla should consider our remainijng businesses that depend on imported inputs, will we be able to import using his toilet papers???? nxaaa!!

me - 1 November 2016

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.