HARARE, November 26 (The Source) – Zimbabwe’s central bank says bond notes, a token currency which will circulate within a basket of multiple currencies, will be introduced on Monday, with an initial rollout of $12 million.
Zimbabwe’s government hopes the bond notes, which will trade at par with the greenback, will help ease a shortage of bank notes blamed on a widening trade gap and the smuggling out of physical US dollars, its adopted currency since it dumped its inflation-ravaged currency in 2009.
“The bond notes will be released into the market through normal banking channels in small denominations of $2 and $5 to fund export incentives of up to 5 percent which will be paid to exporters of goods and services and diaspora remittances,” said the RBZ in a statement issued on Saturday.
“The initial release of bond notes shall be in an amount of $10 million in denominations of $2 and $2 million in $1 bond coins. The features of the bond notes will be released simultaneously with the bond notes.”
The announcement in May of the plans to introduce the notes — described by President Robert Mugabe as a surrogate currency — have been met with stiff resistance, sparking panic withdrawals and demonstrations, including possibly the biggest anti-Mugabe demonstration in a decade, held on July 6.
On November 1 President Robert Mugabe used the Presidential Powers (Temporary Measures) Act to amend the Reserve Bank of Zimbabwe Act to designate the bond notes as legal tender.
But last week, government moved to amend the Reserve Bank of Zimbabwe Amendment Act through Parliament to regularise the introduction of the notes following legal challenges to President Robert Mugabe’s use of a decree to ramrod the new currency into the economy.
The central bank also capped withdrawals of the notes at $50 per day and $150 per week to ‘mitigate against abuse of bond notes.’
The RBZ has engaged and agreed with the Retailers Association of Zimbabwe, fuel companies, representatives of the various business associations and the Consumer Council of Zimbabwe on the use and acceptability of bond notes as a medium of exchange in the country, the central bank added.
The introduction of the bond notes, which the RBZ says are anchored on a $200 million Afreximbank facility, have triggered fears of a return to excessive money-printing and hyperinflation but the central bank on Saturday said it will release the notes “on a measured basis.”
Afreximbank also provided a $50 million loan to back the bond coins currently in circulation.
While the RBZ has been keen to allay fears the printing presses are about to go into overdrive, and that the bond notes are a new Zimbabwe dollar by another name, it said the notes will be deposited into existing US dollar accounts.
The bank has said it will not exceed the $200 million ceiling while Mugabe has said the amount of bond notes in circulation will match the country’s current 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,” said Mugabe on June 9.