RBZ sings a different tune on bond notes

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says the central bank may not inject bond notes worth $75 million into the market by year-end as earlier promised, insisting there was need to build market confidence in the currency.

In September, Mangudya said bond notes worth $75 million would be in circulation by the end of the year.

The RBZ says bond notes are being introduced as an export incentive under the $200 million facility guaranteed by the African Export-Import Bank but they are largely viewed as a desperate measure to address long-running liquidity challenges.

The surrogate currency will be unveiled tomorrow despite market resistance.

Zimbabweans, still smarting from the demise of the local currency in 2009, view the bond notes as an attempt to re-introduce the Zimdollar through the back door.

Mangudya told Standardbusiness at the launch of the Confederation of Zimbabwe Industries Manufacturing Sector Survey last week that having the $75 million in bond notes on the market by the end of the year "could be a possibility…but may not be".

"We are going to start [the release of bond notes] in a well-managed system," he said.

"We do not just issue because we just issue. These things [bond coins and notes] are backed.

"We cannot have a lot of these [bond notes] because this is an export incentive scheme. So when you do not export, you will not have it, so it is a constraint already."

The central bank imports $15 million cash per week on top of what banks are importing but this has not helped to end cash shortages in the country.

The bond notes will join other currencies in the multicurrency basket and will be at par with the United States dollar. It will be the second time in two years that Zimbabwe has introduced a bond currency.

In 2014, RBZ introduced bond coins backed by a $50 million facility. To date, bond coins worth $15 million have been minted.

The bond coins initially faced resistance, especially among transport operators, but gained acceptance when the South African rand depreciated against the dollar.

The biggest constituency which could make or break the bond notes is the transport sector.

According to National Transport Workers' Union of Zimbabwe, there is an average of 200 commuter omnibuses per terminus in Harare's central business district, with the Fourth Street terminus being the biggest.

This means the thousands who use these commuter omnibuses, similar to bond coin introduction, may face resistance from transport operators.

Transport operators' acceptance of the bond notes will depend on whether fuel operators accept a surrogate currency. Some fuel operators are not ready for electronic purchases.