HARARE, June 9 (The Source) – President Robert Mugabe says the cash crisis is “temporary” and that government will press on with the introduction of bond notes, which he called a “surrogate currency,” despite opposition from the market.
The public would eventually get over their initial resistance to bond notes and accept them, Mugabe said on Thursday afternoon, in his first public remarks on the cash crisis. Those opposing the measure were doing so either for political reasons or out of ignorance, Mugabe said.
Speaking to the Zanu PF Central Committee, Mugabe conceded that the long term solution to the cash crunch would be to grow exports by reviving struggling industry and agriculture.
“As I address you, cash shortages are being felt across the board by our people, who cannot easily access their savings and earnings. You might have deposited money in the bank, but there is no money, not enough money. But this is a temporary problem which should be behind us soon, sooner rather than later,” Mugabe said.
Mugabe blamed the cash crunch mostly on the collapse of Zimbabwe’s exports.
“We have been operating under a basket of currencies belonging to foreign countries, even then the basket extended to carry just one currency, the US dollar, which comes to us only by earnings by way of exports.”
However, repeating comments by his Finance Minister Patrick Chinamasa and central bank governor John Mangudya, Mugabe also blamed “crooks” that he said were coming into the country to “fish” for dollars.
“Beyond being a medium of exchange, the USD has become a commodity, by all manner of people of different nations, venturing into our country to cream off our earnings. We cannot allow the situation to continue just like that,” he said.
“Takeall the countries around us; Mozambique, Botswana, Zambia, South Africa and others. They have their own currencies, but they need the dollar also for their international trade and other external activities. They come here – Chinamasa has said ‘we are now like a fishing pool’- they come from these countries to fish the dollar here.”
“They will have to deal with bond notes as a surrogate currency, surrogate to the US dollar that we hold in our reserves.”
Mugabe, however, said only growing Zimbabwe’s exports would ensure a long term solution.
“Since we do not print the dollars – they are American – unless our volume of exports increases, we are left with less and less each time,” he said.
On May 4, the Reserve Bank of Zimbabwe announced it would introduce bond notes, backed by a $200million Afreximbank facility, as part of measures to ease the cash shortages. The measure has met with strong resistance, with many fearing the new notes point to a return of a local currency.
Mugabe said reaction to bond coins, introduced in December 2014, had also been initially hostile, but that the coins had in the end been accepted by the market. The bond notes would eventually be accepted too, he believes.
“When it started, sure, some were suspicious and hesitant to accept it, but they easily accepted it, the first time. But the second time when it was announced we were going to the second stage of it, ah, so much criticism has come from all quarters,” Mugabe said.
“We think those who are opposed to it are really either politically doing so, or doing so out of ignorance. We know it can work, and it will work.”
RBZ has come under criticism for its handling of the crisis, and Mangudya has himself admitted that communication of the bank’s response may have been better. Mugabe said on Thursday that more information on bond notes must be made available to the public, accusing his opponents of driving a campaign of “disinformation” against bond notes.
“The issue of bond notes must be explained to our people, all the more so against virulent disinformation which is being mounted by the opposition.”
When the bond notes enter the market, Mugabe said, “they will certainly prove to be the cure to the challenges we have. But the big cure, naturally, is that we have our own currency, in due course.”
There are fears that government will print more bond notes than provided for under the Afreximbankfacility, a fear grounded in how government fueled world record hyperinflation by excessively printing Zimdollars. But Mugabe insists bond notes in circulation will match what Zimbabwe has in US dollar reserves.
“As our reserves grow, so will the population of bond notes also grow, all to ensure one-to-one correspondence between bond notes in circulation and the USD we hold in our reserves, that is the $200 million that we shall be holding in our banks.”
Mugabe admitted that the decimation of industry is at the core of the crisis, although he repeated his party’s rhetoric that this was mostly caused by economic sanctions.
“Our country, rated second to South Africa in terms of industrialisation in the region, had abandoned manufacturing for trade. There was this shrinkage of the economy due to sanctions and other factors, and industries could not operate as before. They were reduced to producing for the domestic market and not enough to enable us to export.
“We thus were no longer creating wealth, but only trading in wealth created by other economies, by way of irrational imports that were flooding, and that are still flooding, our markets. It’s more of importation, and to import we need the USD, which is now growing less and less in our vaults.”