Jail term for devaluing bond notes

Retailers and dealers fuelling the three-tier pricing that has emerged as market forces are overpowering the forced parity of bond notes face imprisonment of up to seven years.

This comes after President Robert Mugabe on Friday signed into law the Reserve Bank of Zimbabwe Amendment Act, 2017 (No. 1 of 2017) that has regularised the circulation of bond notes.

A bond note unit - limited for domestic commerce - has been fixed by the RBZ to trade at par with one US dollar.

But retailers have low confidence in the bond notes and place different price tags on goods dependent on the currency used to pay for the item.

Firms' prices reflect that one US dollar in hard cash is equivalent to $1,30 in bond notes, meaning that the surrogate currency has already lost 30 percent of its value.

Zimbabwean firms resorting to the black market to get US dollars pay a premium of up to 25 percent.

The Reserve Bank of Zimbabwe (RBZ) last weekend threatened to invoke the new RBZ Act to arrest anyone trading the fiat currency at a rate apart from what they had officially imposed, a situation that clearly undermines market forces influencing the exchange rates of all currencies trading in the economy.

Mugabe, in October last year, invoked the Presidential Powers (Temporary Measures) Act to amend the Reserve Bank of Zimbabwe Act to designate bond notes as legal tender.

Like all regulations made under the Presidential Powers (Temporary Measures) Act, the regulations were only a temporary measure, destined to lapse after 180 days unless earlier repealed or confirmed by Act of Parliament.  

Parliament passed the RBZ Amendment Bill (H.B. 12, 2016) this month, which was gazetted unusually quickly.

Speaker of the National Assembly Jacob Mudenda gave notice in the Government Gazette announcing that the draft bill had been transmitted to the president for his assent and signature on March 7. The changes had since been awaiting presidential approval.

"The following law, which was assented to by the president, is published in terms of Section 131 (6) of the Constitution of Zimbabwe - Reserve Bank of Zimbabwe Amendment Act, 2017 (No. 1 of 2017)," said an extraordinary Government Gazette published last Friday by chief secretary to the President and Cabinet, Misheck Sibanda.

This comes after RBZ deputy governor Kupukile Mlambo told a RBZ and Confederation of Zimbabwe Retailers breakfast meeting held in Harare last weekend that he was aware that some of the retailers have a three-tier pricing system; for bond notes, swiping and US dollar, "that is illegal; the law doesn't allow it."

"But you can't deal with all these things until the Bond Act has been enacted. It has been passed by Parliament; we are just waiting for the president to assent to the Bill. Once it's operational, we can deal with those issues.

"At the moment, it is difficult to deal with such issues because we don't have a legal framework. Once the president signs the Bill, we will address that," he said.

The new Act validates the issuance of bond coins currently in circulation, "for the avoidance of doubt," and Zimbabweans who may choose to inflict any form of damage on bond notes or trade them at any rate not at par with one US dollar could face imprisonment of up to seven years.

Section 42 of the RBZ Act outlines that those who violate the provisions are liable "to imprisonment for a period not exceeding seven years."

Any person who "(c) knowing that it is to be used for an unlawful purpose, has in his possession any material whatsoever upon which has been engraved or made any such words, figures, letters, marks, lines or devices as mentioned in paragraph (a); shall be guilty of an offence..."

Economic commentator and University of Zimbabwe professor, Tony Hawkins, said bond notes were inevitably going to lose value against other currencies because productivity remains weak.

This comes after the RBZ started circulating a $5 bond note last month.

The Central Bank first issued a $2 note and $1 coin last November.