The government will introduce the Bond Notes which it says will be as good as the U.S dollar, and exactly equivalent in monetary value.
This is happening at a time the country is grappling with an acute cash crisis with banks failing to meet the cash demand from the depositors.
Hundreds are sleeping in bank queues as they try to withdraw money they deposited into their own bank accounts. The liquidity crunch has been further worsened by the crumbling economy.
It is evident that the shortage of money in circulation is mainly because a lot of money is going outside the country through the importation of goods and services while exports remain a trickle.
Now, despite reservations by the majority of Zimbabweans, many who fear a repeat of the hyper-inflationary era which resulted in the discarding of the Zimbabwe dollar, the government has ignored all warning shots and has put in place all legal structures needed to roll out the Bond Notes.
Some ministers in President Robert Mugabe's government openly criticised the issuing of bond notes, with the Minister of Tourism Walter Mzembi urging Zimbabwe to opt for the South African rand. In a YouTube Video interview , Mzembi expressed his reservations on the introduction of the bond notes, fearing that the move may worsen the economic situation.
Unmoved by criticism, President Mugabe used his Presidential Powers to side-step parliament and issue a decree paving way for the introduction of bond notes as a legal tender.
This however, has been viewed as an apparent bid to block anticipated court challenges to the controversial new banknotes.
The Reserve Bank of Zimbabwe issued a statement pointing that the bond notes are only an export incentive available to exporters who have actually exported and earned forex for the country. On production of export receipts, the RBZ will deposit 5% of the value of exports into the exporter's bank account in the form of bond notes.
The Bond Notes are officially being introduced to promote exports and to plug chronic shortage of U.S dollars which has seen the government failing to meet its bloated wage bill.
Former Minister of Economic Planning and Investment Promotion in the inclusive government Tapiwa Mashakada has downplayed the introduction of the bond notes as an indirect way of reintroducing the Zimbabwe dollar.
Mashakada pointed that the government is likely working on 6 assumptions:
1. People will use plastic money and they will not need cash.
2. Low denominations of 1, 2 and 5 will discourage burning.
3. The circulation of bond notes will be limited to exporters only.
4. Bond Notes will be backed by a $200 million Afreximbank facility.
5 The 5% Bond Note incentive will create USD 6 billion worth of exports.
6. Prices will remain denominated in USD and the bond note will be at par with the USD.
However, the introduction of the bond notes may trigger unintended consequences among them;
1. Low confidence will result in depositors withdrawing USD balances, taking it out of the country, or not banking at all - since memories of hyperinflation are still fresh.
2. The US$ may migrate to the black market where it will be exchanged for bond notes at a very high exchange rate, and in the end exporters and anyone who needs forex will be forced to go to the black market or apply to the central bank.
3. The Bond Notes may by default become the only currency in circulation as the US$ and Rand may only be found on the black market. This will confirm the view that the bond note is a indirect way of reintroducing the Zimbabwe dollar.
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4. Imports will be restricted due to the rationing of forex.
The world is now waiting to see whether the bond notes will bring any magical anointing to drag the troubled economy out of this economic quagmire. Or as history repeats itself, Zimbabweans will find themselves again having to deal with a sky-rocketing inflation rate that was only curbed after the intervention of the U.S dollar during the Unity government.
Is the government not repeating the disastrous era of the Bearer Cheques with the reckless printing of the bond notes? Surely it goes against the basic economic rule that money should be scarce?
And for how long will the bond note withstand the force of the U.S dollar to maintain its gazetted 1-1 value without signs of staggering?
Answers to the above questions will become clearer as soon as the Bond Notes hit the streets of Harare, and consequences will follow for everyone to see and judge.
But for now, the printing machine is spinning...
