A leading Zimbabwean youth, Kipson Gundani, has praised the central bank’s attempt to revitalize the finance sector, saying the proposed introduction of bond notes within the next two months is set to reboot the declining economy, expected to grow this year by only 1.5 percent.
Gundani, chief economist and deputy executive of Buy Zimbabwe, an entity promoting the marketing and selling of local products, says central bank governor John Mangudya should be commended for coming up with the idea of bond notes that are designed to promote exports.
“We are a country that is experiencing a lot of cash shortages as a result of this high import burden and also as a result as of illicit (cash) outflows. The immediate impact of bond notes is that they will help ease the liquidity issues right now because over the past few weeks and months we have been seeing queues at the banks for cash. So, what the bond notes do is provide temporary relief."
Gundani says the Reserve Bank of Zimbabwe has been failing to clearly articulate ways in which the bond notes will be utilized in tackling the current cash shortages. Mangudya appears to be flip-flopping on this issue, telling Studio 7 this week that members of the public are not expected to get the notes directly from local banks.
According to the central bank governor, the bond notes will be a “some form of bonus for companies” exporting goods to various nations. Critics view this move as an attempt to bring back the defunct Zimbabwe dollar, which was abandoned in 2009 when it was decimated by historic hyperinflationary rates.
Gundani says the uncertainty over the bond notes has unsettled Zimbabweans, including youth that are setting up or revitalizing their businesses.
“This issue was poorly communicated and has caused what I call a bank run and it has aroused mistrust among the young people and transacting public.”
However, he argues that the bond notes are expected to revamp the economy since the coupons are backed by a regional bank loan facility.
“These bond notes are backed by the African Export and Import Bank and because of that they will be able to maintain a one-on-one value (with the United States dollar). One thing you need to appreciate is that bond notes are not a currency per se but a representation of value, a token of value. It is as good as a fuel coupon.”
Zimbabwe is using the United States dollar, Chinese yuan, British pound, South African rand, Botswana pula, among several other currencies.
Gundani further says, “The Zimbabwe economy as it as right now requires $220 million in actual cash for it to sustain itself. We are a very small country with a deposit base of about $4 million to $5 million and according to official statistics available now we should be able to revive the economy.”
Gundani adds that the cash crisis appears to be affecting mostly young people, who end up leaving the country to look for greener pastures.
“Unfortunately the Zimbabwean youth are the hardest hit by economic malady and they are disempowered in the sense that they have got limited access meaning they have no resources to emancipate themselves.”
In his parting note, Gundani says, “Economies thrive in confidence and this is a call particularly to the authorities that govern Zimbabwe economy that say let’s not reinvent the wheel lets follow policies and processes that produce the devise of the day.”