'Bond notes, Zimdollar had no backing'

BOND notes and the Zimdollar (ZWL$) did not have any backing during their tenure, the central bank has said, raising questions on the facilities that were bandied to be supporting the local currency.

Bond notes were introduced in 2016 with the central bank saying they were backed by a US$200 million Afreximbank facility.

The Bond notes and coins were then dropped to allow for the re-introduction of the ZWL$ in June 2019.

A new currency, Zimbabwe Gold (ZiG), replaced the Zimdollar.

During a Monetary Policy Review and Economic Business Outlook Symposium organised by the Confederation of Zimbabwe Industries (CZI) yesterday, RBZ governor John Mushayavanhu said: "RTGS and bond notes were not backed by anything".

"ZiG is backed by foreign trade balances, gold and other precious metals in the vaults in the central back, HE (Zimbabwe President Emmerson Mnangagwa) came to  inspect to assure the nation that we have 2,5 tonnes of gold.

"These are worth US$185 million. We also said we have US$100 million plus of foreign currency balances. That is US$285 million.

"The ZiG that is circulating on the market is 80 million which means we are more than three times covered. That is the difference between ZiG and the other currencies that have been circulating in the past."

When NewsDay sought clarity on this comment, Mushayavanhu said there was no structure supporting Bond notes or the ZWL$.

"What I mean is that, if you recall, the definition of a structured currency is a currency that is backed by either foreign currency or a basket of commodities. In the past, we never had that policy where our local currency was backed so we did not maintain sufficient reserves to back the currency," he said.

"We may have had a situation sometime back that the amount of currency in circulation was higher than the amount of reserves held by the central bank and that was corrected by introducing the structured currency."

This means that, before Mushayavanhu assumed the governorship of the central bank, RBZ had ZWL$18 trillion in circulation without backing.

The shocking revelation led to industry executives at the symposium giving a vote of no confidence in the ZiG.

"Our view as CZI that we think is key and that the Reserve Bank considered is obviously, one, we have to do everything to ensure that the ZiG is backed," CZI president Kurai Matsheza said.

"I hear the varying views, but we hope they [RBZ] have enough arsenal to ensure that whatever is necessary to intervene to make it stable is considered."

He said transparency was needed as to what conversion metrics were used to determine the value of the ZiG.

Zimbabwe National Chamber of Commerce president Mike Kamungeremu said the time for talk was over and what was now needed was for the governor to deliver.

"No more indicating left, then turning right. That is the first message… I attended a school recently where there was a poem where they were saying ‘anything done for us, without us, is not for us. This might be key going forward," he said.

"What we are simply saying is that governor, let us walk together, consult regarding the monies that we are owed. We know the implications on business. It would be good to be engaged in detail so that together we agree on the way forward."

He said business also wanted policy clarity and consistency which while the governor promised, needed to be followed up with some commitment.

"We just hope that is what is going to happen," Kamungeremu said.