Bond notes circulate tomorrow

HARARE - Bond notes are set to be introduced tomorrow through normal banking channels in $2 and $5 denominations, with the Reserve Bank of Zimbabwe (RBZ) using an initial tranche valued at $10 million on a $50 daily and $150 weekly maximum withdrawal limit, the country’s apex bank announced yesterday.

In a statement, the RBZ said features on the notes — which are backed by a $200 million Afreximbank facility and pegged at par with the United States dollar (US$) — were to be released simultaneously with the notes this week.

“The bond notes will be released into the market through normal banking channels in small denominations of $2 and $5 to fund export incentives of up to five percent which will be paid to exporters of goods and services and Diaspora remittances.

“The initial release of bond notes shall be in an amount of $10 million in denominations of $2 and $2 million in $1 bond coins,” the RBZ said, adding the notes will operate along the same lines as bond coins.

Joining a basket of other currencies adopted since January 2009 ranging from the greenback, British pound, Chinese RMB and South Africa rand among others, bond notes are also expected to ease Zimbabwe’s biting cash shortages, according to the RBZ.

The notes 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 US$.

RBZ however, said depositors did not need to open new accounts for the bond notes.

“The banking public is advised that no new accounts will be opened as the bond notes would be deposited into existing US$ accounts.

“In line with the bank’s thrust to promote a less cash society through the use of plastic money, withdrawal limits of bond notes have been set at a maximum of $50 per day and a maximum of $150 per week.

“This measure is in tandem with the objective of the Bank to release bond notes into the market on a measured basis which is critical to mitigate against abuse of bond notes,” the apex bank said.

The John Mangudya-led bank said it had come to a consensus with the Retailers Association of Zimbabwe, fuel companies, representatives of various business associations and the Consumer Council of Zimbabwe on the use and acceptability of bond notes as a medium of exchange in the country.

This comes as the RBZ chief recently said the introduction of bond notes was not going to result in food shortages or an increase in inflation.

Mangudya said the currency was aimed at boosting exports and subsequently grow the economy.

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 the 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.

The roots of the country’s economic malaise can be traced back to 2000 when President Robert Mugabe introduced the 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.

Meanwhile, about $9,4 million worth of bond coins is presently in circulation in the Zimbabwean financial system, as the central bank approaches its $10 million bond coin ceiling.

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