Roving Report – Bulawayo 24 News – Zimbabwe tightening its grip on the bond notes

 

Government is tightening its grip on the bond notes by subjecting cross-borders to serious scrutiny as the money authorities bid to deal with a thriving parallel market of the surrogate currency on its borders.

This comes after Reserve Bank of Zimbabwe (RBZ) official Azvinandawa Saburi told guests at the Zimbabwe National Chamber of Commerce (ZNCC) annual congress in Victoria Falls last week that in addition to South Africa, Mozambique and Zambia, bond notes were now being sold on the Botswana black market.

“Now, on the issue of bond notes being in Botswana, Zambia, Mozambique and so on, I think, as the RBZ, we are a monetary authority, who have to work with other bodies who have responsibility at borders.

“So we will certainly talk to them and advise them on how probably they can handle this issue. On this, I would also want to add this is about the currency, the United States dollar is the most widely used currency,” said Saburi.

“So everyone in the world, everyone who is exporting and so on, is looking for those United States dollars, which is why people play all these shenanigans.

“But, the bottom line is that we are going to work with Zimra to say that when people are going out, they should not take bond notes,” he added.

The country is currently experiencing acute shortages of cash, including the bond notes and US dollars, leading to serious trading on the currency black market.

Zimbabwe introduced bond notes at the end of last year under a $200 million Afreximbank loan in a bid to mitigate the cash crisis but with little success.

There is currently $160m in bond notes and an estimated $600m in circulation in the economy.

Financial research firm Equity Axis said the externalisation of bond notes to neighbouring countries underlined thriving business by cross border traders which in turn led to a lively parallel market.

“The four countries stated are a hub for local cross border traders and naturally markets for the local currency will thrive, starving local banks which estimate a low ratio of 1:10 in terms of bond notes deposits to withdrawals.

“Authorities, therefore, have to concentrate on external debt clearance, fiscal realignment and attraction of credit lines,” Equity Axis said in a research paper.

The RBZ has established dedicated hotline numbers for the public to report individuals and firms or traders that may be involved in cash hoarding, selling or abusing or externalising cash.

It will reward a equivalent to five percent of the reported and recovered cash amount.

“A whistleblower facility has worked quite well for Zimra in enforcing tax compliance. Such a facility at RBZ will force the public to bank their cash and support the flow of cash in the economy. And maybe create jobs for a few professional whistleblowers,” said Equity Axis.

Zimbabwe wants to issue more ‘bond notes’

Move raises inflation fears.

HARARE – Zimbabwe’s central bank wants to issue more domestic currency “bond notes” beyond an initial limit of $200 million, its governor said on Wednesday, in comments that are likely to stoke fears of a return to hyperinflation.

Governor John Mangudya said the Reserve Bank of Zimbabwe (RBZ) was in talks with an unnamed creditor to arrange a loan facility to underpin the increase in bond note issuance, needed to counter US dollar cash shortages crippling the economy.

“We are in the process of negotiating those facilities and then we’ll come back to yourselves after we have made significant progress,” John Mangudya told reporters after a lecture at the University of Zimbabwe.

The southern African nation dumped its own currency in 2009 in favour of the US dollar to end hyperinflation that topped out at 500 billion percent the previous year.

However, with the physical supply of US dollars running out, it launched the so-called “bond notes” in November in an attempt to boost the amount of cash in day-to-day circulation.

The RBZ denied the bond notes were a reintroduction of the Zimbabwe dollar via the bank door, saying they were backed by a $200 million loan from the Cairo-based Afreximbank, a development bank.

It also said it would not issue more than $200 million.

Afreximbank has not confirmed the existence of the $200 million loan facility.

According to its website, the RBZ has issued more than $160 million in bond notes to date. But cash shortages continue, with banks limiting daily withdrawals to as little as $20 while importers face delays due to a dollar crunch.

Mangudya declined to give any more details of the new currency issuance plans.

“We can only know when we have gone through the first phase,” he said.

The International Monetary Fund has said the amount of dollars in circulation is between $600-$800 million, most of it outside the bank sector. That compares with more than $6 billion in bank deposits.