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Did government buy bond notes at +400% discount to reduce exposure?

12 Oct 2018 at 19:25hrs | Views
There is speculation that the Mnangagwa led government deliberately fuelled Zimbabwe's sky-high parallel market rates to mop out bond notes at a cheaper price compared to the 1:1 to the US dollars.

Uncertainty hangs over the future of bond notes and real time gross settlement (RTGS) transfers, as businesses are rejecting the two payment methods and the economy is effectively re-dollarising.

This comes against the background of conflicting signals by senior government officials, particularly Finance minister Mthuli Ncube, that have fuelled Zimbabwe's sky-high parallel market rates, price increases, commodity shortages and temporary company closures.

The bond note suffered heavy battering against the greenback on the parallel market, with its exchange rate touching new lows.

The surrogate currency was trading at over 400 percent against the United States dollar yesterday, compared to 180 percent at the beginning of the month.

If the speculation is correct then the government managed to mop up a significant amount of bond notes at the 400 percent against the United States dollar.

Bond Notes in circulation grew 93.31% from $196.1m to $379.2m from June 2017 to June 2018, according to latest central bank figures. Broad money supply (M3) grew 40.81% from $6.4b to $9.1 billion in the same period. With the rates at 400%, the government could have paid approximately US$2.25 billion or what is valued at $9.1 billion according to government calculations.

Source - Ndoro Tafadzwa
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