Zimbabwe is issuing a new currency, known as bond notes, that officially are equal to the U.S. dollar. The government has gone ahead with the plan despite warnings the new currency will fuel hyperinflation and worsen the already ailing economy.
On Monday, there were still long queues at most ATMs in Harare, despite the release of the new bond notes, which are intended, in part, to ease long-running cash shortages.
The Reserve Bank of Zimbabwe says the new currency will, among other things, increase the country’s exports.
But economist Prosper Chitambara, of the Labor and Economic Development Research Institute of Zimbabwe, says the bond notes will worsen the country’s situation.
"The costs may probably outweigh the intended benefits. Most of the economic agents in Zimbabwe have to buy imports from outside our borders. So they would require either U.S. dollars or South African dollars, or other internationally tradable currencies to be able to do business. Actually the bond note has even exacerbated the macroeconomic sustainability. It has eroded confidence within the financial system. It has created a lot of uncertainties in the market. Investors are not going to be interested in doing business in Zimbabwe," Chitambara said.
Zimbabwe’s economy has been struggling for nearly a generation now, since President Robert Mugabe’s government embarked on a controversial land reform program in 2000 which displaced white commercial farmers off their land without compensation.
That affected the country’s backbone, agriculture. What followed were hyperinflation and shortages of almost all goods.
In 2009, Zimbabwe abandoned its own worthless currency and it has been using all major foreign currencies, but mostly the U.S. dollar.
Now it has introduced bond notes, despite calls to abandon the plan as it might cause the economy to take a nosedive. That advice fell on deaf ears.