Bank queues continue despite bond notes introduction

BANK queues have continued despite the country’s central bank introducing the first batch of bond notes into the system in what was intended to ease a protracted cash crisis in the country.

Account holders are only allowed to withdraw a maximum of $50 a day and not more than $150 a week. A snap survey by NewZimbabwe.com during day two of the introduction of the notes revealed that the cash situation had not yet improved as authorities continued to keep tight controls on the amount of money being used in the system.

The country’s central bank has pulled all the stops to try and manage the injection of a local currency into the market with fears it could be fuel the black market.

Despite scepticism when the currency was introduced on Monday, Zimbabweans have largely resigned themselves to the reality of having a local currency as part of their transacting systems.

But the bond notes are already bringing back memories of the darkest days of the country’s collapsed currency. They bear a resemblance to the old Zimbabwean dollar but are meant to represent a value in US dollars. 

“People are calling it zombie money, because it’s risen from the death of the Zimbabwe dollar and will be about as useful,” a Harare taxi driver told Bloomberg.

“We’ll use it to pay fines and bribes to the police.” Fuel prices saw an 11.3% price difference in the cost of diesel between the US dollar and bond notes, said KPMG.

No immediate relief to Zimbabwe’s cash shortages.  The reserve bank has also said the measure was aimed at boosting imports and exports, but it’s unclear how this helps beyond day-to-day transactions.

“I do not think that Zimbabwe has the current internal production or the export market to have a currency that is valued at the same rate as the US dollar,” Muziwethu Mathema, senior economic advisor with KPMG.

Mathema, a Zimbabwean living in South Africa, admits he is anxious. Many Zimbabweans have shared this feeling in the weeks before the notes were introduced.

Citizens began to line up outside banks to withdraw US dollars, sleeping overnight in lines if necessary.

The fear driving many is that hyperinflation will spiral out of control as it did in 2008, forcing the now defunct Zimbabwean dollar into denominations of 15 zeros as inflation reached an annual rate of 231 million percent.

To prevent a repeat disaster, the reserve bank has committed to limiting circulation of bond notes to $75 million. But the parallel black market need not follow these constraints and hoard the new currency, adversely influencing its already precarious valuation.

Coupled with the existing trust deficit in the markets and the public, the nightmare of hyperinflation may return. What’s worse, the level of productivity was probably higher in 2008 than it is today, warns Mathema.

Bond notes, he says, will not fix Zimbabwe’s economy. Restoring confidence in the currency will only come if currency is restored in the country.

“The issue is how does Zimbabwe attract the capital and liquidity into its country,” he said. “Basically, Zimbabwe needs to posture itself in a manner that is viewed with confidence in the international community.”

Source-New Zimbabwe