More bond notes coming

THE Reserve Bank of Zimbabwe (RBZ) will soon release $300 million worth of bond notes into the market under a new facility secured from the Africa Export and Import Bank (Afreximbank) to ease the cash shortages the country is experiencing.

The move, which will bring the total bond notes in circulation to about $500m, comes at a time the apex bank has already released $175m of the $200m secured from the same bank in May last year.

Presenting the mid-year monetary policy yesterday, RBZ governor, John Mangudya said once concluded, bond notes would be drip-fed into the market.

"As like under the $200 million facility, the central bank will release the bond notes into the market on a drip-feed basis," he said.

As first reported by our sister paper, The Standard, Mangudya noted that the central bank found it imperative to extend the facility after the "success" of the current scheme, which he said had increased exports by 14% since its inception last year.

"Zimbabwe needs to produce and create exports. Foreign exchange must be earned and spent wisely in order to survive," he said.

"There is no substitute to this narrative. We cannot further isolate ourselves by doing nothing and undermining the economy by perpetuating market indiscipline.

"It is against this philosophy and building on the success of the 2,5% to 5% export incentive subsidy scheme in securing and increasing exports of goods and services that the bank found it imperative to extend and enhance the export incentive scheme by a further $300 million under a standby liquidity support facility, which is being finalised right now by Afreximbank."

The RBZ boss said there were $25m worth of bond coins, $175m in bond notes and approximately $800m in various currencies under the multicurrency regime in circulation, to give a total of around $1 billion.

The move will heighten fears by economic analysts, who have always suspected the government will pour in more bond notes to fund the 2018 general elections.

Commenting on the appointment of an independent board to monitor the bond notes in circulation, Mangudya said the RBZ oversight board, as opposed to the earlier promised independent board, now had the mandate to monitor the bond notes in circulation.

"The committee on bond notes: What we have said is that we want a monetary committee, but upon going back to the board, we found out that within the board, there is an independent committee, composed of only independent board members called the bank audit, and oversight committee for the RBZ, where auditors report to and we found out that committee's mandate is to exactly do what we thought the oversight committee was going to do," he said.

"This other committee is there by statute. It is there in the RBZ Act and it is very clear on its role.

"We think the committee might be subservient to the oversight committee, therefore, they are going to be two things, duplication and this committee we are going to put in place is of a lesser value than the one already in place by statute.

"The role of what we expected to be done was subsumed or embodied by the audit oversight committee of the RBZ made up of independent directors and the deputy chairperson of the RBZ is the chairperson of the committee."

Following the introduction of bond notes, which were first announced in May 2016, Mangudya told Zimbabweans that he would appoint an independent body to monitor the printing of the surrogate currency.

But eight months after the bond notes hit the market in November 2016, the governor announced that the bank audit and oversight committee would take over that duty.