No more bond notes, says RBZ

FOREIGNERS used visa cards to withdraw large sums of US dollars in Zimbabwe when the withdrawal limits were still pegged at $3 000 per day resulting in millions of dollars being siphoned out of the country, a situation which ended up creating liquidity challenges.

Before the country started experiencing cash shortages, withdrawal limits were pegged as high as $3 000 per day and that attracted foreigners who were finding it difficult to access US dollars in their countries to flock to Zimbabwe with master cards to cash in.

Reserve Bank of Zimbabwe Deputy Governor Dr Kupukile Mlambo, speaking in Bulawayo on Friday, said this was the major reason that over time the country started to experience cash shortages.

"Zimbabwe was the easy target for the US dollar because the limit was too high but what we have done now, we have adopted international standards where we have reduced the limits. Hopefully depending on the technology, we can allow foreign people to withdraw low amounts of cash than locals," said Dr Mlambo.

He said the country has $300 million in circulation against a requirement of $600 million largely due to a mismatch between Real Time Gross Settlement (RTGS) and nostro accounts.

"If we had not dollarised it would have been easy because for every foreign currency received we would print an equivalent in local currency. But when you are dollarised, the same nostro that you use for imports is the same that you also use for liquidity, it plays a double role.

"I would give an example, fuel companies import fuel but they do not export anything so they do not bring in any foreign currency but they take out. We need the fuel so we pay. For the Reserve Bank we pay twice, we pay for the companies to bring in the money and also pay for the fuel companies to import fuel. So the US dollar becomes pressurised," said Dr Mlambo.

He also said the introduction of bond notes plays a big part in balancing nostro accounts and RTGS. In 2009 the country adopted the use of multiple currencies but the US dollar has been the widely used currency for trading and transactional purposes.

Dr Mlambo said the amount of the US dollar circulating in the country was likely to increase in the next few months once the tobacco selling season opens. The Tobacco Industry and Marketing Board stated that the selling season officially opens on Wednesday with deliveries of the golden leaf having started two weeks ago while contract sales will begin on Thursday.

The tobacco marketing season traditionally starts mid-February, but opened on 30 March last year as the crop had been affected by the El-Nino induced drought.

"We expect to have a bit more US dollars because of the tobacco season. We expect that the situation will improve for the next few months because of the tobacco money coming in. I don't think that queues will completely disappear (at banks), because it depends on pay days also. So from the 15th to the 30th of each month it will be civil servants pay days, the queues will obviously be there," said Dr Mlambo.

He said the Central Bank was very happy with how the public had embraced bond notes and ruled out any prospects of introducing another denomination citing that such a move "will fuel the rise of the black market exchange".

"We are very happy with how the bond note is doing. Some people were expecting chaos when we introduced it to an extent that some even said that on the same day that you introduce it will lose value by 50 percent. We haven't seen all that, instead it has maintained its parity with the US dollar both at the banks and in the shops.

"I will, however, not pretend that there are other people that are selling the US dollar as it comes in whenever there is a shortage…but what I am happy about is that if you go to the main stores you will find that the bond note is still keeping the 1:1 value," said Dr Mlambo.

He said the RBZ continues to come up with measures to restore confidence into the banking sector stating that one such move was the reduction of non-performing loans from 20 percent to below 10 percent through the creation of Zimbabwe Asset Management Corporation (Zamco).

"We have also created the Credit Reference that is also meant for banks to check the quality of people that they are about to lend to. We didn't want a situation where there is Zamco, which is trying to reduce non-performing loans and banks making new risky loans… Also the other challenge that we have to face is to make people have trust to put their money in the bank.

"What has helped us is the use of plastic money as people are no longer afraid to put their money in banks, before you would have wanted to pull out your money as soon as possible. For me it makes sense not to get into the bank queue and take money but go to the shops and buy using plastic money," said Dr Mlambo.

He said it was encouraging that more people were opening accounts especially those in the farming and mining sectors.