Bond Notes Causing More Harm Than Good

Opinion

By Mandla Tshuma

Bulawayo – Zimbabwe’s surrogate currency – bond notes – which came into effect towards the end of 2016 as a measure by then-president Robert Mugabe’s administration to stem cash challenges, has now become an unnecessary evil which has to be gotten rid of as a matter of urgency.  

The recent hike in prices of basic commodities, public transport fares and exchange rates distortions barely two months after the July 30 harmonised polls, have their roots in the bond notes whose actual value is by and large not known.

While the government had in the past been insisting that the proxy currency was at par with the United States dollar it appears to be now backing off bit by bit.

Announcing his mid-term monetary policy statement at the beginning of October, Reserve Bank of Zimbabwe governor, John Mangudya, directed that banks should create separate Foreign Currency Accounts (FCAs) from the existing ones, a clear indication that it has also dawned on the central bank that the surrogate currency can never be equal to the greenback.

Mangudya’s announcement coupled with Finance Minister, Mthuli Ncube’s recent admission in London that bond notes were not equal to the United State dollar, caused mayhem within the country’s financial services sector, whose effect is still far-reaching.

The parallel market exchange rate for the bond note shot to US$1:5 bond notes, a development, which left shop owners with no choice but to adjust their prices, while others had to temporarily close shop because of market confusion.

With all this in mind, one would argue that had the government listened to common Zimbabweans who tried to resist the introduction of both bond coins and notes in 2014 and 2016 respectively, the country would not be facing the cash crisis that it finds itself in today.

Zimbabweans were from the word go opposed to the introduction of the bond notes as they saw it as a way of bringing back the now defunct local currency which also caused untold suffering to citizens in 2008 when the inflation shot beyond measurable levels eroding people’s incomes and savings.

The people of Zimbabwe, who did not want a repeat of the 2008 scenario, took to the streets protesting the introduction of bond notes thinking the government would budge and suspend the whole idea.

However, that was not to be as the government which still lacks the culture of consulting, went ahead and imposed the surrogate currency on Zimbabweans and today everyone is feeling the pinch of that reckless and inconsiderate decision.

As a matter of fact, as long as the bond notes continue circulating, there cannot be a guarantee of price stability because the real value of the bond notes remains unknown simply because it is not real money.

The introduction of bond notes actually disrupted the smooth operation of the multicurrency system in Zimbabwe.

The government should have considered joining the Rand Union, instead of creating the bond notes monster which continues to haunt the country. If Zimbabwe is to get out of this crisis, the country has no choice but to immediately demonetise the bond notes and ensure proper compensation of account holders as well as those with cash. The country can then start afresh relying on the multicurrency regime or even immediately adopt the rand.