14 March 2017

Zimbabwe: 'Avoid Printing Higher Denomination Bond Notes'

Photo: allafrica.com
Zimbabwe's bond notes and U.S. dollar notes.

The Bankers Association of Zimbabwe (BAZ) says Government should avoid printing higher denominations of bond notes in order to maintain value and confidence in the "surrogate" currency.

Zimbabwe, which is using the United States dollar as its chief currency, is battling cash shortages that have been triggered by mainly high imports and externalisation.

To mitigate the cash shortages, the government introduced bond notes, a medium of exchange equivalent in value to the greenback, which are backed by a $200 million Afrexim Bank facility.

To date only small denominations, the $2 and $5 note have been issued. BAZ president Dr Charity Jinya told the Parliamentary Portfolio Committee on Budget and Finance that bankers were keen on the continued issuance of small denominations.

"I think the reason why to our mind the Reserve Bank issued $2, $5 and the coins was to give confidence that we are not introducing a currency via the back door. When we start talking around $10 or $20 in bond notes you could start raising that concern (of the re-introduction of a local currency)," she said.

"For us the little foreign currency that we are seeing, we would like to continue seeing it, we do not want it to disappear and the moment the public thinks a local currency is being introduced via the back door that little foreign currency may disappear completely and that would be really dangerous for this market."

Dr Jinya said most banks were working towards improving their electronic payment systems to cope with the rapid increase in demand for such services.

She said some banks were experiencing delays of up to a month to process international payment requests for clients. As of February, the Reserve Bank of Zimbabwe had released bond notes worth $94 million. The Central Bank has said it will not be negligent to flood the market with bond notes to avoid fuelling inflation. The bond notes have gone some way in easing the cash shortages and clearing queues that had become the order of the day in most banks.

New Ziana.

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