Zimbabwe's bond notes project collapsing

That sooner or later Reserve Bank of Zimbabwe chief John Mangudya's bond notes project would run into problems was a foregone conclusion.

The bond notes, which were touted as the panacea to Zimbabwe's cash problems, have so far proven to be a cancer that is slowly eating away at the little gains of economic stability achieved by the introduction of the US dollar in 2009.

Earlier warnings that the surrogate currency would be discounted by the Zimbabwean public were quickly dismissed. Elsewhere, we carry a story on the problems wrought so far by the issue of bond notes.

Yet despite assurances from the central bank last year and to date that the bond notes have some sort of value derived from a US$200 million Afrexim Bank facility backing the notes, the situation on the ground shows that his assurances are not enough.

External payments glitches have intensified. Expatriates cannot send a few dollars to family overseas.

Already banks, themselves unwilling participants in a project they secretly knew would fail, but too scared to resist a regulator's desperate move to end a cash crisis, are demanding hard currency from customers seeking to transfer funds out of the country not withstanding current bank balances.

Essentially, what banks are saying is although we played along to the whims of the central bank to launch bond notes with a value that is said to be at par with the American unit, the balances they claim we have with them are nothing but just electronic money, which unfortunately cannot be mistaken for hard currency. Anyone who has attempted to import anything into the country will testify to this.

This situation is not only preposterous but also a blatant disregard for the financial welfare of citizens by the state.

Instead of promoting and preserving the financial well-being of citizens, the government, through the central bank, is leading a campaign to erode the financial integrity of its citizens and plunge them into untold misery.

It is now apparent that Mangudya's assurances that bond notes would have par value with the US dollar and be used in lieu of the currency and share the same account despite protestations to separate the two accounts, was nothing but a yarn spun so beautifully.

Could this be systematic theft from the populace through devious means?

Many are beginning to believe this was all an elaborate scheme to deprive Zimbabweans of their valuable dollars. More worryingly, the greenback seems to have vanished suddenly from circulation.

In the circumstances, citizens have a reason to mistrust the central bank and the financial institutions. Unfortunately, it seems a confidence crisis has occurred.
Against such a background charecterised by low confidence in the currency, it is just a matter of time before the chickens come home to roost.