Today the Reserve Bank of Zimbabwe (RBZ) is injecting $12 million dollars into the banking system. The money will be injected in denominations of $2, $5 notes and $1 coins. In a statement on the RBZ website on 26 September 2016, the RBZ announced that it will release $10 million of $2 bond notes and $2 million of $1 bond coins. The withdrawal limits for bond notes will be $50 per day and $150 per week. It is not clear whether these will be the new withdrawal limits on all USD accounts or the banks will have a system of how to determine how much bond notes an account has withdrawn; it remains to be seen how the limits will operate.
There are however four problems with the way RBZ has handled the issuance of bond notes into the market which has led to the public losing confidence in the bond notes. These are:
1. The horse has come before the carrot: The RBZ claims this is a 5% export incentive financed by the African Import Export Bank (Afrexim Bank) to the tune of $200 million. The question now is; farmers and all other exporters have not yet received the 5% promised incentive which Governor Mangudya said will be deposited into the respective exporters’ bank accounts through the RTGS system. So then, if the exporters have not yet received the incentive, is the bond note really backed by anything of value?
2. Independent Oversight Committee that never was: Governor Mangudya promised citizens when he was seeking the public’s support for his brainchild that he will ensure there is an independent oversight committee. This would have given citizens assurance that the government will not print more money than what they have promised the citizens or more than what the alleged Afrexim Bank loan facility dictates. However, the oversight committee has not been put in place and citizens are in the dark about how much will be printed by who and when. Mind you, up to now, the RBZ has not made public the loan facility documentation with the African Financial Institute and neither has Afrexim Bank commented on the development since the matter came to public light in May 2016. Why?
3. Leaked Images: Social media was awash with leaked images of the bond notes, a day before the official unveiling of the dreaded notes to the public. One question that the public now has is; is this RBZ or banking employees who have leaked them or is it some corner money dealers who already are in possession of the bond notes? We all remember the days of Gideon Gono when new bearer cheques would first hit the streets before banks dispensed them. This was an indication of the corrupt system which the currency was being printed under and it led to the total collapse of our local currency (among other reasons) in January 2009.
4. Surprise $1 Bond Coin: Nothing was said by the RBZ with regards to another bond coin and to everyone’s surprise, another coin has been added to the collection; a $1 coin. These sort of surprises are what makes citizens lose confidence in the RBZ’s pronunciations. Who knows there could be another surprise in the works.
5. Black market exchange rate: As of Friday 25 November, the unofficial exchange rate for cash in exchange for bank credit balance was $1(cash):$1.18(bank credit). RBZ has since June limited the flow of telegraphic transfers for things like school fees, car importation, and even business transactions leading to the re-emergence of a black money market for people to access cash to go and pay for goods and services abroad. The black market has been created by RBZ limitations and the RBZ has done nothing to redress the gap it created in the transactions market. One can only guess that the exchange rate will only get worse with the introduction of the bond notes.
SMEZIM will update readers on how the bond notes have been accepted by the market later on this week.