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The Rise and Fall of the Bond Note- Mashakada
03 May 2017 at 01:43hrs | Views
MDC-T deputy secretary general Tapiwa Mashakada has lamented the rise and fall of the new Zimbabwean currency Bond Notes and Coins a development which has further crumbled the country's economic situation.
He said after the US dollar leaked out of circulation for various reasons including but not limited to externalization, capital flight, illicit financial outflows and low export receipts, the Reserve Bank introduced bond notes in a bid to tame the liquidity crisis.
"Bond notes were conceived of as export incentives whereby a 5% payout would be given to an exporter upon proof of export. A $200 million Afrexim-bank facility was put aside. But to date nobody has seen the term sheet. Pundits of bond notes argued that the multiplier effect of export incentives would yield $6billion export receipts upon the disbursement of the full Afrexim-Bank tranche," he said.
"From the onset, some of us refused to accept that logic. We argued that bond notes were an attempt to bring back the Zimbabwe dollar through the back door. We also argued that the export response was inelastic due to the economy wide supply bottlenecks. True to our predictions bank queues started forming. Cash withdrawal limits were imposed and retailers introduced a 3 tier pricing system for bond notes, US dollar, mobile payment."
He said the cash crisis has now reached a head.
"Banks have run out of bond notes. Depositors are stranded. Zimbabwe yet again has been plunged into a deep financial crisis. Money demand is outstripping money supply all the time even under the bond note regime. This can only tell us that the monetary base has lagged behind aggregate demand. Zimbabwe needs a quick solution to end the financial crisis," he said.
He said after the US dollar leaked out of circulation for various reasons including but not limited to externalization, capital flight, illicit financial outflows and low export receipts, the Reserve Bank introduced bond notes in a bid to tame the liquidity crisis.
"Bond notes were conceived of as export incentives whereby a 5% payout would be given to an exporter upon proof of export. A $200 million Afrexim-bank facility was put aside. But to date nobody has seen the term sheet. Pundits of bond notes argued that the multiplier effect of export incentives would yield $6billion export receipts upon the disbursement of the full Afrexim-Bank tranche," he said.
"From the onset, some of us refused to accept that logic. We argued that bond notes were an attempt to bring back the Zimbabwe dollar through the back door. We also argued that the export response was inelastic due to the economy wide supply bottlenecks. True to our predictions bank queues started forming. Cash withdrawal limits were imposed and retailers introduced a 3 tier pricing system for bond notes, US dollar, mobile payment."
He said the cash crisis has now reached a head.
"Banks have run out of bond notes. Depositors are stranded. Zimbabwe yet again has been plunged into a deep financial crisis. Money demand is outstripping money supply all the time even under the bond note regime. This can only tell us that the monetary base has lagged behind aggregate demand. Zimbabwe needs a quick solution to end the financial crisis," he said.
Source - Byo24News
