Bond notes: A success or financial Armageddon?

ZIMBABWE begins a new economic chapter, which we are not very optimistic of, as the first batch of bond notes are rolled out today.

Source: Bond notes: A success or financial Armageddon? – NewsDay Zimbabwe November 28, 2016

Something had to be done about the cash shortages, but we are convinced bond notes are not the panacea and may lead the country to financial and economic ruin.

There are many factors for the mistrust of bond notes, beginning with our chequered financial history, the legal framework for their introduction and confusing statements from the Reserve Bank of Zimbabwe (RBZ) and government ministers.

We have been on this path before with the introduction of the special agro-cheques and bearers’ cheques and the scars are still visible.

Zimbabweans still remember vividly the promises made under RBZ’s sunrise projects starting from 2006 and how these brought gloom and doom, as the printing presses ran overtime, spawning inflation.

Central bank boss, John Mangudya has told Zimbabweans about a deal with Afreximbank for a $200 million loan to back the bond notes, except no one has seen this agreement, only helping to sow the seed of mistrust in him and the government.

Mangudya has hidden behind the veil of confidentiality and refused to make public the agreement with Afreximbank, but he should know the stakes are high and his actions will only fuel suspicion on the government’s real intentions.

Bond notes may turn out to be a genius idea, but as long as the country’s anxiety and suspicion are not assuaged, then they are doomed to fail.

Then there are the belated public hearings by Parliament on bond notes due to start this week, whose objective has now been rendered meaningless because of the RBZ’s decision to introduce the bond notes today.

While Parliament has been reduced to nothing more than a rubber stamp of Zanu PF’s policies, authorities would have had an opportunity to hear what Zimbabweans really think of these notes.

As it is, the notes are being introduced to a highly sceptical people, who feel the government has bulldozed them into accepting the currency and this is suicidal for any currency.

To add onto that, bond notes are being introduced on the backing of the Presidential Powers (Temporary Measures) Act, whose constitutionality is under question.

This raises many questions and were the Constitutional Court to rule that this law is unconstitutional, will the bond notes be withdrawn or the government is hoping that by this time, the parallel parliamentary process would have resulted in the RBZ Amendment Bill having received the parliamentary nod?

For the country’s sake, we hope the bond notes are a success or today could mark the beginning of a financial Armageddon.