27 July 2017

Zimbabwe: 'Let Market Determine Bond Note Value'

Photo: Jerry Chifamba/AllAfrica
Harare CBD.

Zimbabwean monetary authorities should let the market determine the true value of the bond note currency to curb its externalisation and in turn reduce cash shortages, a leading economist has said.

Zimbabwe introduced the surrogate currency last year backed by a $200 million Afrexim Bank facility, principally to ease a bank note shortage of the multi-currency mix adopted for local trading in 2009.

A combination of hard currency externalisation and low exports were blamed for cash shortages.

But the bond notes, whose value is at par with the US dollar, have also disappeared from the market, believed to have been widely externalised to neighbouring countries.

The Reserve Bank of Zimbabwe (RBZ) has admitted that the bond notes were being sold for US dollars in neighbouring countries.

This is despite the fact that the currency was meant for local trade only.

University of Zimbabwe economics professor and government advisor Ashok Chakravati told a business meeting on Tuesday that government should come up with strategies to retain the surrogate currency within Zimbabwe.

"The problem with the bond note in my view is the peg with the US dollar that is the main problem. We have a black market and what is happening is that anyone who wants to trade the bond note for a discount or premium, has to do it illegally on Fourth street or in Messina or at the Road Port or somewhere else," he said.

"In my opinion Government should remove the peg from the bond note, all that trading happening across the border will come back into Zimbabwe; why should it trade outside the country when you would like it over here."

Chakravati said the central bank's initiative of licensing more bureau de change was a noble idea, and would promote a free exchange of the currencies in use in Zimbabwe.

"So what we need to do is to legalise the system and create a market. The Reserve Bank has taken the first step already by trying to extend the bureau de change," he said.

The RBZ has so far released $175 million worth of bond notes and has indicated a desire to print more.

New Ziana.

More on This

Bond Notes Fuel Inflation - IMF

Government's introduction of bond notes last year to address a relentless cash crisis fuelled a currency black market,… Read more »

Copyright © 2017 The Herald. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.