Plans by Zimbabwe’s central bank governor John Mangudya to introduce bond notes as an export incentive at the end of October have triggered speculation that authorities are planning to re-introduce the Zimbabwean dollar through the back door.
Some depositors, such as 27 year-old Audrey Munemo of Harare, are now waking up as early as 4am to join long queues at local banks with the hope of being able to access their money amid worsening cash shortages.
“I have been here in the queue at the bank for about four hours, ever since morning I was just here and the banks are saying they don’t have money. I was just trying to withdraw all my money before these bond notes start circulating because we don’t know what these authorities are planning to do.”
In the countryside, some villagers such as Gilbert Nyikadzino of Zvimba district in President Robert Mugabe’s home province of Mashonaland West, are now engaging in barter trade in order to earn their keep.
“We are having a serious cash crisis especially here in the rural areas whereby we are now resorting to barter trade. For example, if I want, let’s say mealie-meal I am now taking my small livestock like goats to exchange for that mealie-meal. The situation is so dire in Zimbabwe and we are in serious trouble due to liquidity challenges.”
But the central bank chief says there is no reason for Zimbabweans to panic. Mangudya says the proposed bond notes would be backed by a $200 million dollar facility provided by the Africa Export and Import Bank.
The Reserve Bank of Zimbabwe’s governor says Zimbabwe, after adopting the use of multiple currencies in 2008 when the country’s inflation reached the 500 billion percent mark, would continue to use foreign currencies such as the American dollar and the South African Rand until such a time when Zimbabwe’s economic situation has improved for the southern African country to re-introduce its own currency.
“The purpose of bond notes is to deal with an incentive for exporters but I think people are now confusing that the bond now is coming here to cater for cash shortages. No. There is no relationship, this is an export incentive scheme.”
These special bond coins are currently circulating in Zimbabwe.
Economist Prosper Chitambara, who works with the Labor and Economic Research Institute of Zimbabwe, says Zimbabwe’s cash crisis is a result of Harare’s misplaced priorities and laws that scare away potential investors such as the Indigenization Act that compels foreign-owned businesses to cede at least 51 percent of their shareholding to black Zimbabweans.
Chitambara says Harare should ensure that it cuts its expenditure and focus more on improving the supply side of the economy in order to grow the country’s economy.
“We also need to rationalize the structure of our government so that it’s in line with the population of Zimbabwe and also with the size of the economy of Zimbabwe and that could entail for example reducing the cabinet, reducing the size of parliament, firing deputy ministers, reducing our embassies especially in those countries that are not strategic in terms of our trade and economic relations with them.”
For his part, Zimbabwe’s 92 year-old strongman, Robert Mugabe, who has ruled Zimbabwe since 1980, says his government would do all it can to improve foreign direct investment inflows.
Mr. Mugabe’s nephew, Patrick Zhuwao, who presides over the indigenization law as minister, recently threatened to use the law to force some foreign owned banks such as Standard Chartered and Barclays to cede their shareholding.
President Mugabe told parliament Thursday that his government would relax the black empowerment law that critics say is deterring investment.
Recently, some anti-government protestors marched in the capital calling on authorities to halt their plans to introduce the bond notes.
But the protests were crashed by heavily-armed police who went on to impose a blanket ban on demonstrations in Harare.