World Economy

Zimbabweans Wary of New USD Bonds

Zimbabweans Wary of New USD BondsZimbabweans Wary of New USD Bonds

The Reserve Bank of Zimbabwe has announced that it will be printing local bond notes with the same value as the US dollar. Most residents are wary of the move saying it could worsen the cash crisis.

Sithando, a communication specialist in Zimbabwe, is perturbed with the announcement by the RBZ that it will start printing bond notes which have the same value as the dollar.

“There might be panic, you will find that the US dollar will begin to disappear from the streets and people will only be using the bond notes,” Sithando told DW.

She said the biggest danger is that the people will no longer be able to withdraw US dollars once the bond notes start circulating. “This will mean they [US dollars] will start re-appearing in the black market.”

Tafadzwa, a bank teller is of the same opinion. He told DW that once the bond notes are out, they will be prone to inflation as was the case in 2008. “Businesses will find it difficult to import stuff from countries like South Africa,” he said.

“I want the US dollar to remain, notwithstanding the current [cash] shortages.”

Besides the printing of the bond notes, the governor of the Reserve Bank of Zimbabwe John Mangudya said they would limit daily bank withdrawals to $1,000. Some ATMs would also be shut down meaning Zimbabweans might be forced to stay longer in queues if they are to get cash from banks.

He ruled out the return of the Zimbabwe dollar which the country abandoned in 2009. Due to one of the worst hyperinflation, President Robert Mugabe’s government opted for a multi-currency system.

Currently the euro, Botswana pula, South African rand, Chinese yuan, Japanese yen, Australian dollar and the Indian rupee are all considered legal tender in Zimbabwe. But it’s the US dollar which is mostly in circulation.

According to Mangudya, in order to solve the cash crisis in Zimbabwe while at the same stabilizing the economy, it was essential to go back to the basics. “The reserve bank has established a $200 million facility which is supported by the African Export and Import Bank to provide a cushion for high demand for foreign exchange in this economy,” the central bank governor said.

“In order to mitigate against possible abuse of this [$200 million] facility through capital flight, proceeds from the fund shall be granted to qualifying foreign exchange earners in bond coins and notes, which shall operate alongside the currencies within the multi-currency system and at par with the US dollar,” the governor added.

The new bond notes will be in $2, $5 and $10 denominations.