New 'bond notes' facility on the cards - Mangudya

THE Reserve Bank of Zimbabwe is on the verge of securing $500 million from international lending institutions which will cover for the country's immediate needs during the foreign currency dry season when the tobacco season comes to an end.

In addition, the Apex Bank is also negotiating with lenders for additional funds to boost exports through the continued provision of export incentives facility through bond notes, RBZ Governor Dr John Mangudya said last night.

In interview, Dr Mangudya said the first priority was to secure money to cover critical needs once the tobacco seasons has ended.

Tobacco is a major foreign currency earner for the country but the selling season is coming to an end.

Last year the country earned nearly $1 billion from tobacco exports.

"On this one ($500 million), we are almost close, we have agreed the terms and conditions and this is the money that we will use to cover essentials such as fuel and electricity when the tobacco selling season comes to an end," he said.

On the cash shortages, Dr Mangudya said people must understand that bond notes were never introduced to solve the cash shortages but as an export incentive.

"At the moment we have $175 million worth of bond notes and this must be seen in the context of being the value of the export incentives that we have given so far. Going forward we are also looking at securing another fund to ring fence the incentive and this must not be mistaken as to say we are just increasing bond notes in the market. We will be increasing the export incentive facility to boost our exports and increase generation of foreign currency. The bond notes have become a downstream benefit and I can understand when this benefit is now being taken as a solution to our cash problems," he said.

The negotiations, said Dr Mangudya, were still in infancy hence he could not divulge how much or which lenders the bank was negotiating with.

The $200 million facility which is being used to support the export incentive was secured from the Africa Export Import Bank (Afrexim Bank).

"We need to push exports and that is the only solution to our problem. We introduced the export incentive so that our goods can become competitive and so that we can also manage to get the foreign currency," he said.

Dr Mangudya said at the moment exports were lower than imports resulting in expenditure being more than the income.

"At the end Government is forced to borrow from the local market and this increases money supply - money which, however, is not backed by foreign currency. When the civil servants and other workers are paid they want to access their money in notes. They want to access money which is not there," he said.

Dr Mangudya said the solution then lies in pushing exports and promote more remittances from Zimbabweans living outside the country.

He added that some retailers were also to blame as they were not banking their proceeds and also not accepting the plastic money.

"Apart from $175 million in bond notes and coins we also have $600 million in other currencies but it is because of the indiscipline of some traders who are refusing to bank and adopt plastic money and this is causing cash problems. These retailers are refusing to bank because they want to externalise the money, they are corrupt and this rent seeking behaviour must stop. Instead of selling goods they are now selling money, money is no longer used as a store of value or commodity of exchange but is now a commodity which is now being sold. We need to change this," said Dr Mangudya. He reiterated that people must embrace plastic money.