ZIMBABWE will print ZWL$400 million bond notes which it
says will be drip-fed into the economy to cover the gap left after government
banned the use of multi-currencies in local transactions.
This was revealed by Finance minister Mthuli Ncube and
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya when they appeared before
the Parliamentary Portfolio Committee on Budget and Finance to speak on the
impact of Statutory Instrument (SI) 142 of 2019 has had on the economy.
The Finance minister said they will not be printing a new
Zimbabwe dollar as it is represented by the bond note, coins and the RTGS
dollar virtual currency.
“SI142 (2019) has removed the multi-currency system (US
dollar and rand) and there is a gap in terms of paper money and there is a
difference between paper money and currency in that
currency is the ZWL$ represented by bond notes, coins and
RTGS$,” Mangudya said.
“By printing the ZWL$400 million, we are saying there is
need for increase in paper money to replace the gap created by non-usage of
foreign currency and we are saying the ZWL$400
million will be on a drip-feed basis. And as we print new
money, it will also replace the old dirty notes.”
Mangudya said the ZWL$400 million bond notes will bring
asset banking into normalcy, adding that Zimbabwe’s money, including the US
dollar was so dirty and old that whenever exported the notes were unattractive to the extent that their value
was reduced to half their worth.
The RBZ governor said the interbank market was fully
functional with $525 million having gone through the market by last Friday. He
said there were now 55 bureaux de change in the country, which include
financial institutions, with 43 being registered and operational.
Asked by Bulawayo Central MP Nicola Watson (MDC Alliance)
if the printing of more bond notes will not result in financial indiscipline,
spiralling inflation and economic decay similar
to that of 2008 era, Ncube said his monetary policies were
sound compared to 2008 when there was no fiscal and monetary discipline.
“In 2008, we had fiscal indiscipline and we are far from
that as our policies and conditions are different and I do not think we are
repeating the same thing. We are in a far better position than then. I would
like to assure you that we are not in 2008 where we had a number of zeroes
compared to now. It is about policies and we are in a different policy
environment,” Ncube said.
The Finance minister said the Zimdollar will reduce
pressure on foreign currency and ultimately lead to a reduction in prices.
Mangudya added that people only needed to be patient as a baby does not grow in one day.
But, MPs lambasted Ncube for failure to effectively
communicate the introduction of the local currency to citizens, resulting in
unscrupulous con-artistes flooding the rural areas,
misinforming people and buying the US$ from villagers at
1:1 rate.
He said the RBZ was in the process of hiring three
professionals who will look into the issue of explaining the Zimdollar
introduction using local languages.
“When you deal with issues around currency, you do not call
for a referendum, especially in this case where there are economic attacks. You
move swiftly and stealthily and with
incisiveness. The President (Emmerson Mnangagwa) hinted
that there will be introduction of a domestic currency and we thought that this
would prepare people. A currency is a sensitive issue and the introduction of a
new currency has to be well-managed. We will explain in indigenous languages to
ensure the charlatans do not extort people,” Ncube said.
The Finance minister said nostro accounts will not be
affected by SI 142, and the withdrawal limit will continue at $1 000 daily,
adding that government, through the RBZ, has assumed all legacy debts and all
RTGS$ representing legacy debts which shall be moved from commercial banks to
the central bank.
“Interest rates shall be pegged at 50% per annum even
though they will remain negative, given that the inflation increase will likely
make the Zimbabwean dollar more attractive in the near term. This will also
discourage borrowing for speculative purposes,” Ncube said.
MPs expressed concern over the very high interest rates,
saying they will further destroy the ailing economy and were punitive for
businesses, a situation that will affect production.
The concern came after Mangudya had told the committee that
to achieve economic recovery, there was need to increase production.
“We increased interest rates to 50% to deal with
speculation after we had noticed that some companies were now borrowing in
domestic RTGS$ to make US$ and put it in their FCA (foreign
currency accounts) accounts and start all over again and so
we said let us close that gap and that is why we had a sharp increase in
interest rates,” Mangudya said.
Ncube said the 50% interest rate will work if banks use the
customer principles of good borrowing which will result in credit scoring.
But MPs argued that the 50% interest rate and the lack of
electricity and fuel will further cripple production, industry and the economy.
Meanwhile, Mangudya also indicated that the interest rates
will not affect mortgages as they were entered into on a contractual basis. On
payments of insurance and medical aid in US
dollars, Mangudya said the Insurance and Pensions
Commission was looking at the issue.
Ncube promised to further adjust salaries of civil servants
to cushion them from inflation and increase their purchasing power by the end
of July when he announces his mid-term budget statement.
He said all transactions, except for airfares – which will
be in US dollars, will be in the local currency, adding that tourists will be
expected to pay for services in foreign
currency, but change money at banks and bureaux de change
if they wanted to purchase goods and services in the country.
Mberengwa North MP Tafanana Zhou (Zanu PF) then asked Ncube
to explain issues surrounding the $10 million payment to South African
electricity supplier Eskom, which the authority said it had not received.
Finance secretary George Guvamatanga said: “When a payment
is made, there is a process that takes place in government and there is a point
when a budget is released and authorised and telegraphic transfers made. When a budget is released, the
Energy minister [Fortune Chasi] can say it has been paid.”
Ncube admitted that the country faced a deteriorating
energy situation, adding that $33 million is owed to Eskom and $37 million to
Mozambique. He said the $10 million would be settled today (yesterday). Newsday
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