The government of Zimbabwe, under the rule of President Robert Mugabe, is struggling to deflect nationwide criticism of its bond note policy to be implemented next week, according to sources speaking to SaharaReporters in Harare.
Bond notes, according to Zimbabwean sources describing them to SaharaReporters, are paper notes issued by the Federal Reserve Bank of Zimbabwe in the same value of US dollars. The Zimbabwe bond notes, to be issued next week, are intended to fill the gap in demand for US dollar bills and South African rand, and the cash available in Zimbabwe. The government of Zimbabwe, in attempt to regain control of an economy spiraling out of control, have implemented draconian monetary policies limiting the amount of money Zimbabwean nationals can get from ATMs and placed punitive tariffs on select goods purchased abroad and imported into the country.
However experts speaking to the Daily News of Zimbabwe worry that Mr. Mugabe’s latest stopgap measure will exacerbate an already agonizing economic situation for Zimbabwe residents.
According to the Daily News, experts said that issuing the bond notes will likely lead to residents frantically extracting their dollars from the banks, a massive withdrawal of monetary assets by companies, and capital flight from Zimbabwe. The report added that it could “trigger more citizen unrest in the country”.
The hope by Zimbabwe government officials is that the bond notes will be successful based off of experience with bond coins in the country. Bond coins, which debuted two years ago, are coins pegged to the value of the dollar in denomination of 5, 10, 25, and 50 cents. However, residents speaking to SaharaReporters explained that the value of those coins cannot be compared to the value of US dollars used widely because the small denominations of coins do not influence major financial transactions. Bond coins are most often used in transactions when changed is needed for products less than one dollar.
One Zimbabwe resident in Harare, speaking to SaharaReporters, disclosed that he is worried that the government will pay civil servant salaries in bond notes. He stated that his wife is a civil servant and paying her salary in bond notes could significantly reduce their household income if the value of bond notes depreciates compared to the dollar.
“It is likely that after a few days the bond notes will become less [in value] than the dollar”, he said.
He added also that “the bond note will never be stronger than the [South African] rand.”
A former Finance Minister told the Daily News of Zimbabwe that “[the Mugabe government] has not succeeded in convincing Zimbabweans that the bond notes are not another way of re-introducing the Zimbabwean dollar because they do not trust the government anymore.”
He added that “no matter how much they try to explain it Zimbabweans will not accept the bond notes.”
Despite the growing concern centered on these bond notes one of the leading daily newspapers in Zimbabwe, The Herald, which has very close ties to Mr. Mugabe’s political party ZANU-PF, buried its story on bond notes to the second page of its business section.
The story, attempting to justify the issuing of bond notes, was based off of Reserve Bank Governor John Mangudya’s recent speech arguing that they will improve financial transparency and provide much-needed cash in the country.