RBZ releases $15 mln in $5 bond notes
HARARE – The $5 bond note has entered into circulation with the Reserve Bank of Zimbabwe saying $15 million has been released as export incentives.
Governor Dr John Mangudya told Finx the release brings the total amount of bond notes in circulation to $94 million (from $79 million at the last release).
He said the security features on the bond notes are the same as on the $2 bond note except that the new notes are in purple.
The use of bond notes within the multi-currency exchange system are anchored to a $200 million Afreximbank export promotion facility. They are pegged 1:1 to the US dollar. Industry is currently pushing for the export incentive to be moved to 10% from the current 5%.
Long term confidence in the notes is expected to be determined by how accountable the monetary authorities are going to be seen by members of the public and the extent of likely inflationary pressures.
The public is also expecting to see the composition of the bond notes committee that will oversee the administration of the notes in the economy. There is already a process going on to draft a legislation that is going to govern the operations of this committee. What is however worrying is that close to half of the bond notes are already in circulation while this important committee is not yet in place. Be that as it may, the central bank is already empowered by the constitution to “protect the currency of Zimbabwe in the interest of balanced and sustainable economic growth”.
While the issuance of bond notes in limited amounts in the short-term could relieve some liquidity pressure, it will not address the underlying causes of the foreign exchange shortages.
The International Monetary Fund recently said more reforms are needed to deal with the foreign currency shortages. “As we have said before, policy action is needed to reduce the budget deficit; accelerate structural reforms; and re-engage with the international community to access much needed financial support”.
“All the elements in this three-pronged approach are essential to place the economy on a sustainable footing and lay the groundwork for growth and poverty reduction. Without reforms, risks are increasingly on the downside” said the IMF.
Dr Mangudya is expected to soon present his Monetary Policy Statement, which is likely to be rich on export promotion policies.