$100 million bond notes in circulation

THE Reserve Bank of Zimbabwe (RBZ) says $100 million worth of bond notes are in circulation in the market since their introduction last year.

The bond notes, which are at par with the United States dollar and guaranteed by a $200 million Africa Export Import Bank (AfreximBank) facility, were introduced in November last year to promote the growth and development of exports through a five percent export incentive scheme.

Speaking during an economics seminar for high schools in Bulawayo last Friday, RBZ Deputy Governor Dr Kupukile Mlambo urged the public to continue embracing the surrogate currency as it has also eased the prevailing cash crisis.

"We are quite pleased right now with the way the bond note is working. I know that there has been a shortage of the US dollars in the market," he said.

Dr Mlambo said the US dollar shortage was due to increased expenditure of foreign currency through imports during the festive season.

"Our economy depends on three main products; gold, tobacco and platinum for exports. But between October and end of February, we only have two products that give us foreign currency, that is gold and platinum.

"The tobacco season ends in October and it is unfortunate that from October that is when we have a lot of expenditure that requires foreign currency because of Christmas and so on," said Dr Mlambo.

Due to the tobacco marketing season that starts this week, he said the prevailing cash crisis was expected to ease up to October.

"From now up to October we will be fine because all our commodities will be giving us cash so the US dollar will become a bit more plentiful in the market.

"However, the US dollar will not be a lot because in this economy we will never have enough dollars due to the way we are industrialised," said Mlambo.

He said since the introduction of bond notes, the monetary authority has released to the market about $100 million worth of the surrogate currency.

Dr Mlambo said it was RBZ's plan not to print additional bond notes outside the $200 million AfreximBank facility adding that doing so would hamper efforts to restore confidence in the banking sector as well as creating hyperinflation.

He also ruled out the possibility of the country introducing its local currency anytime soon.

"If people are so against the bond notes, can you imagine what they will do if we introduce the Zimbabwe dollar. I think there will be chaos so we are not yet ready for that (introduction of local currency)," Dr Mlambo said.

The monetary authority anticipates seeing the continued use of a multicurrency system until such a time when the economy fully recovers, he said.

The country adopted a multicurrency regime in February 2009 as a strategy to address hyperinflation that had reached unprecedented levels. Among other currencies, Zimbabwe's multicurrency basket includes the US dollar, South African Rand, British Pound, Botswana Pula, and the Indian Rupee.