Source: Bond notes firm on parallel market | The Financial Gazette November 30, 2017
THE value of bond notes appreciated on the parallel market on hopes of economic recovery following the appointment of President Emmerson Mnangagwa, who is expected to institute broad reforms.
Mnangagwa replaced former President Robert Mugabe, who resigned under pressure from the military and his ZANU-PF party last week.
The new president has undertaken to run a leaner government, promote investment and job creation as well as tackle graft.
On Tuesday, Mnangagwa announced a three-month amnesty for people who externalised funds to return the money and assets illegally moved out of the country.
Zimbabwe has no formal currency of its own, having informally dollarised in 2009. It did, however, introduced a surrogate currency, the bond note, pegged at parity to the United States dollar in November 2016, in a bid to arrest an acute shortage of greenbacks in the economy.
Currently, the country has at least three exchange rates for its the various mutations of its unofficial currency; one for electronic bank transfers, another for mobile money transfers and yet another for the bond notes.
A snap survey by The Financial Gazette yesterday showed a transfer using real time gross settlement was attracting a 45 percent premium for US$100 from 60 percent during the same period last week. If one transacted using Ecocash the premium ranged from 30 percent to 35 percent, from as much as 45 percent while for hard cash the range was between 20 percent and 25 percent from 30 percent.
The value of bond notes has been going down due to the high demand for foreign currency for payment of externally sourced goods and services. Banks’ requirement for accounts to be pre-funded with US dollars has also contributed to the depreciation of bond notes.
This is despite the fact that the Reserve Bank of Zimbabwe (RBZ) has pegged its value at par with the US dollar. The bond note is, however, not internationally tradable hence many businesses that rely on imports to remain viable are not keen to hold them for a long period.
Economists say while the value of bond notes was determined by supply and demand, positive sentiments by the new President and calls to act on corruption was stabilising rates on the parallel market.
“The change of government has so far instilled confidence in a number of sectors and the international community hence the developments on the parallel market. The jury is still out so we wait to see the direction the rates take,” an economist told The Financial Gazette.
Bond notes, described by government and the RBZ as a surrogate of the United States dollar and backed by a US$200 million facility from the African Export and Import Bank, have largely been viewed as a return of the Zimbabwe dollar, abandoned in 2009 due to hyperinflation.
The hard currency stock has seen a decline due to lack of foreign investment and sluggish growth in exports. As a result of the high premiums, companies and retailers are forced to recover the costs of the premiums by increasing the prices of basic commodities thus increasing the rate of inflation.