Friday, 28 October 2016

BOND NOTES WILL NOT SWAMP THE MARKET : MANGUDYA

BOND notes will be released into circulation gradually and sparingly to ensure that they retain a critical characteristic of currency — scarcity — the Reserve Bank of Zimbabwe has said.

RBZ Governor Dr John Mangudya told a Zimbabwe National Chamber of Commerce business review breakfast meeting in Harare yesterday that $65 million worth of bond notes would be released next month. The balance making up the $200 million bond notes support facility from the African Export and Import Bank will be released into circulation gradually, until end of 2017.

But Dr Mangudya said while there is a lot of hype around bond notes, focus should rather be on growing production and exports since problems facing Zimbabwe were economic not the impending bond notes.

The bond notes will come into circulation next month after nationwide awareness campaigns, with an initial amount of only $65 million being released into circulation.
Dr Mangudya said the Reserve Bank is fully aware of the need to ensure scarcity and not abundance of money. The bond notes are meant to monetise the incentive of 2,5 percent and 5 percent to the different exporters who qualify for the carrot.

Dr Mangudya said that the release of the surrogate currency into the market will be so gradual and in small amounts some people may not be able to notice it.

“The maximum is $200 million and that will take us up to 2017. The release of bond notes into the market will be on a gradual basis and we are going to release them sparingly that you may not even notice it,” he said. “We will finalise an oversight board that will monitor issuance and management of the bond notes.”

He said that bond notes were part of measures to generate foreign exchange for a country without its own currency, but uses a basket of currencies. As such, this demonstrated bold commitment to multi- currency.

“This is an incentive to increase exports. We want to promote export generation. They (exporters) are facing difficulties (from high cost of production) due to a strong US dollar. Other currencies have been depreciating yet they are price takers. We want to support them so that they maintain or increase exports.”

The bond notes will be printed only to a maximum $200 million with each unit ranking equal in value to the dollar. However, the RBZ says it could not release real green back into circulation, as they would be externalised. Small notes of $2 and $5 bonds will be released.

A total of $1,8 billion, the central bank governor said, was creamed off from the Zimbabwe economy last year by unscrupulous individuals seeking the comfort of the widely sought after international reserve currency.

As such, there was need to provide a medium of exchange, which is regarded as legal tender only in Zimbabwe. The Governor said as monetary authorities, they want money to be scarce and not have abundance of it in a manner that could end up driving inflation in the economy.

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