Zimbabwe central bank Chief John Mangudya’s “task number one” as he prepares to unveil bond notes is convincing the public that they will not depreciate in value, leading economists have said.
Mangudya last week announced the introduction of “bond notes” as an answer to the enduring liquidity crunch and an attempt to stimulate the country’s ailing economy.
Banks are running out of cash, long queues are now the order of the day amid an ongoing economic crisis.
But the public, economic analysts, legal experts and the opposition have have slammed the central bank chief for his new measures to try and revive the ailing economy. Opposition parties are urging Zimbabweans to protest the introduction of the bond notes. They accuse the Reserve Bank of Zimbabwe of being used on suicide missions by President Robert Mugabe's government.
The International Monetary Fund recently said Zimbabwe’s economic difficulties have deepened.
The lender of last resort said, “Drought, erratic rains, and increasing temperatures, have reduced agricultural output and disrupted hydro power production and water supplies. Economic activity is severely constrained by tight liquidity conditions resulting from limited external inflows and lower commodity prices. Inflation remains in negative territory, because of the appreciating U.S. dollar - the country’s main currency - and lower commodity prices. Zimbabwe remains in debt distress and the level of international reserves is low.”
The notes, coming in $2, $5, $10 and $20 denominations, and backed by $200 million from the African Export Import Bank, will start circulating in two months.
Director of the Labor and Economic Development Research Institute, Godfrey Kanyenze, says Mangudya’s dilemma is that government has failed to reform and people lack confidence in the ability of the central bank to address both the cash crunch and economic problems.
Kanyenze says the bond notes will see the dollar appreciate even more.
Mangudya says people have not forgotten the disaster of seven years ago when Harare introduced bearer notes that had no value at all.
Economist Brains Muchemwa, director of a micro finance institution, Oxlink Capital, told VOA Studio 7 that the notes would be dead on arrival if Mangudya does not get a buy in from Zimbabweans.