IMF engaging Zimbabwe on bond notes

The International Monetary Fund (IMF) says it is engaging the Zimbabwe government on its highly controversial plan to introduce bond notes.

According to a press briefing by William Murray, the Bretton Woods institution's deputy spokesperson, the IMF's executive board had concluded - after its Article IV consultations in early May - that the economy was severely constrained by tight liquidity conditions as a result of limited external inflows and lower commodity prices, hence the much-criticized initiative could bring a bit of relief.

"...we are in discussions all the time with Zimbabwe. We will follow up and, actually, if we get something fresh . . . we will let everybody here know or put it in the transcript," he said in response to concerns that President Robert Mugabe's administration could be "tempted to print dollar bonds and return to it's derided currency", which might result in eye-popping inflation that was previously seen in 2008.

Seven years after ditching its currency, the Harare administration plans to introduce "bond notes" in October - described as an effective new currency - to stem a deepening cash shortage.

A scarcity of US dollars, which is the most widely used currency in a basket of currencies in the southern African nation, has led to bank ATMs running out of cash, triggering long queues at banks and exacerbating a sense of economic crisis.

To counter the problem, Reserve Bank of Zimbabwe governor John Mangudya has announced a range of measures, including the bond notes initiative and incentive to exporters, which he also says is aimed at helping the ordinary Zimbabwean.