Zimbabwe: Officials battle fear of bond note launch

By John Cassim

HARARE, Zimbabwe (AA) - Amid concerns that Zimbabwe could soon reintroduce its long-discarded local currency in the form of bond notes, authorities are battling to stem a series of panic cash withdrawals.

Zimbabweans fear the bond notes – essentially, I.O.U. notes backed by a $200 million African Export-Import Bank (Afreximbank) loan – are another way of re-introducing the Zimbabwe dollar and a replay of the hyperinflation that plagued the country in 2008.

By the time the local currency was dropped in 2009, the inflation rate had soared over a record 500 billion percent.

Bank withdrawal limits have been reduced to around $50 a day, long bank queues are commonplace, and commodities in shops are in short supply.

But when the government announced that bond notes would be introduced in mid-2016, to cure the cash crunch, confidence levels fell further due to fear.

The bond notes, whose value would be on par with the U.S. greenback, the dominant currency, would be printed in Germany courtesy of the Afreximbank loan guarantee.

But during a breakfast meeting in Harare on Thursday, John Mangudya, the governor of Zimbabwe’s Reserve Bank, said the multi-currency system is there to stay.

"I am aware the coming of bond notes has triggered panic in the financial sector but let me assure you that this is not the coming of the local currency.

“Our savings were eroded during the hyperinflation era but I assure you bond notes are meant to stem cash shortages," Mangudya said.

The governor added that cash shortages have been worsened by the externalization of the U.S. dollar.

"We noticed some people have opened new businesses just to acquire the U.S. dollar, that are then sold to foreign businesspeople in and out of the country owing to the easing of regional currencies such as the South African rand," Mangudya said.

However the governor was reluctant to announce a date for the introduction of bond notes, as security features are still being designed.

The government has on three occasions postponed the coming of bond notes to sometime in November, owing to negative perceptions that triggered nationwide protests in July.