HARARE, May 5 (The Source) – The Confederation of Zimbabwe Industries (CZI) has urged Zimbabweans to embrace the proposed bond notes, saying they will boost internal trade and ease the cash crunch threatening Zimbabwe’s already lethargic economy.
The planned bond notes are backed by a new $200 million bond facility from Afreximbank.
“The bond notes will assist to ease the strain on the trading economy across the country (and) will support local internal trade. The US dollars and Rand in circulation had been depleted to below $300 million. The bond notes are also backed by a Nostro Account with Afrexim Bank so they are fully convertible,” CZI president Busisa Moyo told The Source.
“This a sequel to the bond coins which were initially resisted but today are widely accepted in all commercial sectors of the economy. So the bond notes provide temporary reprieve from an internal trading point of view.”
Moyo however said Zimbabwe needs to tackle bigger issues such as the import deficit of $3billion by reducing imports though minimum local content rules and increasing exports through internal devaluation.
“We have to look at increasing foreign direct investment to reach $2billion annually from the current $400million, and incentivising formal Diaspora remittances to exceed $2 billion. These are the bigger elephants in the room,” said Moyo.
Zimbabwe National Chamber of Commerce chief executive Chris Mugaga said the introduction of the notes was inevitable.
“It’s a move that was always coming given the precarious situation we are in. Something had to be done,” he said.
“The (central bank) governor is walking a very tight rope like he did when he introduced the bond coins, but as business we were consulted and we are in full support of this move because we know that there is no immediate solution to the challenges we are facing.”
Economic analyst John Robertson said acceptance of the bond notes would depend on how banks handle conversion of the bond notes to hard currency as business will need hard currency to restock.
“We don’t want a situation where we will have a parallel exchange for the bond notes.Restriction of foreign payments had to happen, it is only logical. It would be less of a problem for the country if the shops do not to have to import wines and whisky,” said Robertson.
“Policy should be focused on the actual problem, which is the lack of ability to make these goods locally. If we rebuild the capacity of industry we will not need to import and there will be no priority list to talk of.”
Economist Reginald Shoko said the bond notes postpone the return of the Zimdollar, but not for long.
“In as much as it makes economic sense for Zimbabwe to have bond notes circulating in the economy, the country needs to have its own currency. Introduction of bonds notes only addresses the symptoms, not the real problems,” he said.
“Government must restore confidence of the people in state institutions because, at the moment, there is no trust. People are skeptical of the government’s move to introduce bond notes and some will stop putting their money in banks. Zimbabweans must also learn to use plastic money as well as electronic platforms,” Shoko said. “The country has reached a point where business, industry, government and civil society organisations must sit down and craft a lasting solution.”