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Chamisa says bond note must go
01 Oct 2018 at 13:05hrs | Views
MDC president Nelson Chamisa has called for the urgent removal of the bond note, saying the surrogate currency has worsened the economic crisis gripping the country.
In a recent tweet, the MDC leader said he is concerned by the dramatic drop of the Real Time Gross Settlement (RTGS) and bond note rates against the United States dollar.
Speaking through his spokesperson, Nkululeko Sibanda, Chamisa said the bond note, which was introduced in 2016 to ease the cash crisis, had been a failure because of the mismanagement of the country's economy.
"You need to have a plan to remove the bond note; you can't deal with the bond note crisis when you are an illegitimate government. In order to deal with it, you need what is called investor confidence," said Sibanda, referring to Chamisa's claims that the July 30 polls were rigged in favour of the ruling Zanu-PF party.
"You need confidence from neighbouring countries. (President Emmerson) Mnangagwa said he would join monetary unions across the region, picking and choosing the most appropriate, but in order to join those unions, you need to have an economy that is sustainable and has sufficient political legitimacy but that is a problem because he is illegitimate," he added.
Since Mnangagwa's inauguration in August, the bond note has continued to lose ground on the black market.
A post by Premier Alternative Market Tracker in Zimbabwe, Zim Bollar Index, indicates that the parallel market continues to takes huge discounts on the bond and RTGS, with the rates hitting 100 percent and 117 percent respectively.
Last week, the RTGS to USD was trading at 100 percent with the bond to USD pegged at 95 percent.
The RTGS to bond rate was at seven percent while the Old Mutual Implied Rate (OMIR) was at 154 percent.
Last Wednesday, the OMIR was at eight percent and 146 percent, respectively.
At the same time the EcoCash to USD has increased to 20 percent from Wednesday's 15 percent.
The South African rand has risen to 13 percent from Wednesday's 12 percent while the pula remains at 15 percent.
Economist, John Robertson, told the Daily News that government's decision to introduce the bond note was a bad idea.
"The bond note issue was considered a good idea because people were externalising the US dollar notes. The theory was that, because nobody would bother externalising bond notes, they would remain in the country and their numbers would provide the needed cash balances.
"However, the deeper problem was falling confidence and that is what government should have tackled. If confidence had been restored by government, decisions to work with business instead of against it, the growing confidence would have reversed the flow of US dollars and the bond notes would not have been needed," said Robertson.
He said the high rates prevailing on the black market were a result of the decision to cancel the collateral value of billions of dollars worth of agricultural land and lack of confidence in government by its citizens.
"People have grown tired of waiting for promises and when people grow tired of waiting for change, confidence ebbs away.
"Scarcity is the most immediate cause, but the scarcity has its own causes. Confidence seems to be going down again, possibly because the promises being made all the time are not being kept quickly enough.
"Government is still claiming that sanctions did the damage to the economy, but the real damage was done by policy decisions that government does not want to change," added Robertson.
President of the Confederation of Zimbabwe Retailers Denford Mutashu said the upsurge in foreign currency rates was indicative of the serious shortage of foreign currency and low exports against growing import bill, and the fiscal imbalance in the country.
He said companies that import raw materials and goods that are not manufactured locally were facing serious hurdles in accessing foreign currency.
"Almost all sectors have suddenly become a priority for foreign currency allocation," he said.
Recently, President Emmerson Mnangagwa and new Finance minister Mthuli Ncube ruled out the immediate return of the decommissioned Zimbabwe dollar, saying the country will for now continue to use bond notes and the multiple currency system until the local economy stabilises.
In a recent tweet, the MDC leader said he is concerned by the dramatic drop of the Real Time Gross Settlement (RTGS) and bond note rates against the United States dollar.
Speaking through his spokesperson, Nkululeko Sibanda, Chamisa said the bond note, which was introduced in 2016 to ease the cash crisis, had been a failure because of the mismanagement of the country's economy.
"You need to have a plan to remove the bond note; you can't deal with the bond note crisis when you are an illegitimate government. In order to deal with it, you need what is called investor confidence," said Sibanda, referring to Chamisa's claims that the July 30 polls were rigged in favour of the ruling Zanu-PF party.
"You need confidence from neighbouring countries. (President Emmerson) Mnangagwa said he would join monetary unions across the region, picking and choosing the most appropriate, but in order to join those unions, you need to have an economy that is sustainable and has sufficient political legitimacy but that is a problem because he is illegitimate," he added.
Since Mnangagwa's inauguration in August, the bond note has continued to lose ground on the black market.
A post by Premier Alternative Market Tracker in Zimbabwe, Zim Bollar Index, indicates that the parallel market continues to takes huge discounts on the bond and RTGS, with the rates hitting 100 percent and 117 percent respectively.
Last week, the RTGS to USD was trading at 100 percent with the bond to USD pegged at 95 percent.
The RTGS to bond rate was at seven percent while the Old Mutual Implied Rate (OMIR) was at 154 percent.
Last Wednesday, the OMIR was at eight percent and 146 percent, respectively.
At the same time the EcoCash to USD has increased to 20 percent from Wednesday's 15 percent.
The South African rand has risen to 13 percent from Wednesday's 12 percent while the pula remains at 15 percent.
"The bond note issue was considered a good idea because people were externalising the US dollar notes. The theory was that, because nobody would bother externalising bond notes, they would remain in the country and their numbers would provide the needed cash balances.
"However, the deeper problem was falling confidence and that is what government should have tackled. If confidence had been restored by government, decisions to work with business instead of against it, the growing confidence would have reversed the flow of US dollars and the bond notes would not have been needed," said Robertson.
He said the high rates prevailing on the black market were a result of the decision to cancel the collateral value of billions of dollars worth of agricultural land and lack of confidence in government by its citizens.
"People have grown tired of waiting for promises and when people grow tired of waiting for change, confidence ebbs away.
"Scarcity is the most immediate cause, but the scarcity has its own causes. Confidence seems to be going down again, possibly because the promises being made all the time are not being kept quickly enough.
"Government is still claiming that sanctions did the damage to the economy, but the real damage was done by policy decisions that government does not want to change," added Robertson.
President of the Confederation of Zimbabwe Retailers Denford Mutashu said the upsurge in foreign currency rates was indicative of the serious shortage of foreign currency and low exports against growing import bill, and the fiscal imbalance in the country.
He said companies that import raw materials and goods that are not manufactured locally were facing serious hurdles in accessing foreign currency.
"Almost all sectors have suddenly become a priority for foreign currency allocation," he said.
Recently, President Emmerson Mnangagwa and new Finance minister Mthuli Ncube ruled out the immediate return of the decommissioned Zimbabwe dollar, saying the country will for now continue to use bond notes and the multiple currency system until the local economy stabilises.
Source - dailynews
