The Bankers Association of Zimbabwe (BAZ), which represents the interests of banking institutions, has indicated its support for the planned introduction of bond notes, first announced by the Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, in May. But sources said some bank executives have expressed reservations over the bond notes, which have been described by President Robert Mugabe as a “surrogate currency” of the United States dollar, the currency of the country’s national budget.
Bankers have been divided between maintaining a multi-currency system, where the US dollar has been the anchor currency, and joining the Rand Union, several interviews with financial sector chief executives officers (CEOs) revealed. The Rand Union is a grouping of four countries using the South African Rand as a medium of exchange.
These are South Africa, Namibia, Swaziland and Lesotho. Bankers said this week that while in public, BAZ had presented the face of a unified banking sector, telling the nation that the powerful lobby had placed its full weight behind the RBZ, there were serious divisions within the sector and support for the RBZ’s measures was not unanimous.
The country dumped its national currency in 2009 and adopted a multicurrency regime to escape a hyperinflationary crisis that had triggered widespread commodity shortages in the country.
The measures had briefly calmed the markets until a wave of externalisation and currency shortages rattled the economy this year, sending shock waves in government and the private sector.
To arrest the potentially devastating currency crisis Mangudya announced early this year that he would introduce bond notes. The plan is to use bond notes to fund a five percent export incentive in order to boost vital hard currency inflows.
Under his strategy, bond notes would be deposited into exporters’ foreign currency accounts.
He claims these would be easily exchanged for greenbacks on request. But this has done very little to discount suspicion, with the majority of Zimbabweans demanding that the RBZ halts the plan.
Zimbabweans have bitter memories of the hyperinflationary crisis that destroyed the economy, when the local currency suffered extensive erosion, leaving people without savings.
Billions worth of pensions were wiped out. This week, the Bankers Association of Zimbabwe (BAZ) said the lobby was ready to see the smooth rollout of bond notes.
But discussions with bank CEOs revealed that financial institutions detested bond notes as much as the public. “Banks are ready to comply with regulatory requirements,” said BAZ president, Charity Jinya.
“Banks work very closely with regulatory authorities to ensure that whenever new policy measures are announced, adequate arrangements are made. I am not aware of any banks that have declined to accept transactions in bond notes once introduced. Banks still await notification of the operating modalities for bond notes,” Jinya added.
She said the information that banks were now awaiting from the central bank included, the size and security features of the notes. Once this information is availed, banks will take the necessary steps to ensure that these are incorporated, she added.
But a bank CEO said there were divergent views over bond notes in the sector. “We have different views over the issue of bond notes,” the leading bank CEO said.
“However, when it comes to presenting our thoughts in public, we have to speak with one voice as BAZ. As an institution, we have taken the position that will defend shareholder value and the interest of our customers,” the banker said.
Another bank CEO confirmed the sharp divisions between BAZ members during deliberations.
“Just like in any other organisation, there were discerning voices during our deliberations. That is how measures like the formation of a committee to oversee bond notes ended up being in place. But the majority prevailed, and our position as BAZ is that we support the governor,” he added.
Ahead of the introduction of bond notes next month, volatilities in banks have touched fresh depths, with several leading banks failing to honour withdrawals.
The central bank chief told the Financial Gazette that he had laid the groundwork to arrest extensive currency externalisation.
The stock of the greenback in circulation has been diminishing at a worrying scale.
“We are importing notes,” Mangudya said. “We will not lie to the people; we want to genuinely help the people,” Mangudya added, in response to growing questions over reports of a Zimbabwe dollar return.
Asked if he was aware of sharp differences among bankers on the issue, the RBZ governor said as far as he was concerned, bankers we fully behind his plan.