'Back new bond notes with more US dollars'

HARARE - The move by the Reserve Bank of Zimbabwe (RBZ) to increase the current $200m bond notes in the Zimbabwean economy to $500m must be backed by equivalent amounts of US dollars to help defend the value peg, the NKC African Economics think-tank has said.

To allay market fears that the introduction of an additional $300m worth of bond notes signals a possible return of the Zimdollar, RBZ governor John Mangudya highlighted that the “multi-currency system is here to stay up until the fundamentals of our own currency have been achieved”. The governor stated that Harare was currently negotiating with Afreximbank to secure an additional loan to serve as backing for the $300m note issuance.

“Also, we believe it would be prudent for the RBZ to follow a strategy characterised by a gradual introduction of additional bond notes.

“This would allow for better control over the money supply while also giving the apex bank the opportunity to monitor the market’s reaction and the value of the bond note,” NKC analyst Chantelle Matthee said. 

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