Bond notes not solution to Zimbabwe's woes, says IMF

THE International Monetary Fund (IMF) says Zimbabwe requires a comprehensive policy package to retrieve the economy from the woods, instead of seeking salvation in bond notes.

IMF African Department director, Abebe Aemro Selassie told journalists on Sunday that a holistic package of reforms was needed to get Zimbabwe out of the crisis.

"There's a limited amount of foreign exchange inflows coming in and no monetary policy tool. So, they are in a difficult circumstance right now. We think that, going down this one [bond] note route, in and on itself, will not address the challenges that the country has.

So, it's very important to have a more comprehensive policy package, which also addresses a lot of the fiscal challenges that the country faces, a lot of the structural reforms that have to be done," he said.

Selassie had been asked to comment on the bond note concept.

Bond notes were introduced last November under a $200 million export incentive facility guaranteed by the African Export Import Bank. To date, bond notes worth $120 million have been issued.

Selassie's remarks corroborate sentiments by many local economists and analysts, who had dissuaded the Reserve Bank of Zimbabwe (RBZ) from introducing the surrogate currency. RBZ plunged headlong and introduced the bond notes which have been blamed for the flight of the United States dollar from the official system, thereby fuelling a black market. Cash hoarding has been prevalent with the $5 and $2 notes disappearing from the official system.

The central bank accuses some ungrateful foreign-owned businesses of hoarding cash. The businesses are operating in the reserved sector of the economy. RBZ has rolled out a number of controls to manage the cash situation.

Recently, RBZ placed a cap of $20 on cash back facilities offered by retailers. It has also ordered banks to put a withdrawal limit of $200 per week.