Source: Bond notes now in November | The Financial Gazette October 6, 2016
Clemence Manyukwe, Political Editor
IT is the kind of stuff that sustains soap operas. But this time around, it is mostly stereotypical characters who are capturing the public’s imagination because when politicians fall in love, it ceases to be a private affair.
THE planned introduction of bond notes has been moved to early November, with a public campaign on the new currency expected to commence at the end of this month, Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, has said.Mangudya had indicated during his mid-term monetary policy statement last month that the bond notes would be unveiled to the market at the end of this month.
However, he said the marketing of the new currency, said to be a surrogate of the dominant United States dollar, would start on October 31 with the release of bond notes expected in early November.
Mangudya, who admitted during an interview with the Financial Gazette that there was public scepticism over the new currency, said bond notes would in fact help maintain the current multi-currency system rather than eliminate it.
The bond notes would be used to incentivise exporters.
Mangudya said bond notes would be used as a funding mechanism for the export incentive in order to preserve the US dollars supporting the scheme, which will be bankrolled to the tune of US$200 million by the African Export and Import Bank.
The bond notes would be zero-coupon, tax-exempt debt instruments.
Exporters would receive the incentive in US dollars and the incentive would be credited to their US dollar accounts in US dollar currency.
An exporter would then transact through real-time gross settlement system (RTGS), make foreign payments for imports of goods and services and transact freely within the multi-currency exchange system.
He said the issuance of bond notes has a self-control mechanism in that when there are no exports, there would be no bond notes.
The bond notes would be released gradually into the economy in sympathy with export receipts through normal banking channels up to a maximum of US$200 million.
“The ceiling would be reached when total exports are around US$6 billion.
The multi-currency system is there to stay, but for it to be sustainable it needs to be oiled, it needs to be supported by foreign exchange, and that foreign exchange comes from exports. That means we need to look after exporters so that they can continue to give us foreign exchange inflow in Zimbabwe which is required to sustain the multi-currency system,” he said.
He said the introduction of bond notes was to provide an inventive to the exporters so that they can continue to bring foreign currency into the country.
Last month, the RBZ said bond notes would start circulating with an initial US$75 million being injected into the market by the end of the year.
“Other countries in the region provide incentives to their exporters. In Zimbabwe’s case we have been using the US dollar which has been appreciating and therefore making our exports uncompetitive, simultaneously, production is going down because of the depressed commodity prices. We are now providing an incentive which at least can mitigate against these negativities,” Mangudya said
“By so doing, it means exporters are being given a premium to export more. So what we are doing is to restore and maintain the multi-currency system and not jeopardise it,” he said
“We need to mitigate against capital flight. There is no account for bond notes. Bond notes operate just like bond coins so that they are put in the US dollar account and the exporters will be credited with the five percent in their accounts,” he said.
“Zimbabwe has been importing more than it has been exporting by more than US$2,5 billion per annum, it means the country is consuming more than it is producing. Cumulatively, from 2008 to now, Zimbabwe has exported close to US$23 billion of deficit, that deficit was being financed using exports and Diaspora money.
“If we do not do anything to look after exporters and those bringing in foreign currency, we are not looking after the goose that is laying the golden egg. I stand for improving the lives of the people of Zimbabwe. If we produce more it means more exports, if we do nothing it would be criminal,” Mangudya said.
COMMENTS
What a load of rubbish.
If the incentive is 5%, then the ceiling will be reached when exports reach exactly US$4 billion – not “around US$ 6 billion”.
Can’t Mangudya multiply?
the US$ has already disappeared of the street, inflation is taking off rapidly and the bond is not even out yet. just the idea od it is enough to fuel inflation.
as for money leaving the country – ask mugabe why he or grace are always in singapore…. thats where his stash is.
convert to rand and accept the Rand Monetary Area rules … it will be better for the population and for the productive sector, but perhaps not for the criminals in power.
I dont think that is an option as the rand monetary area is not going to allow a failed state to join it.
Just in time for Christmas bonuses
Yes, pure PR, without a shred of viable fiscal policy, ALTHOUGH…
…bond notes would work in a closed system, where there were no interfaces with other economic systems, such as an island nation that had zero imports, zero exports, no tourism, no foreign travel by citizens, no foreign travel by public officials. Businesses could not gain from transactions, and the value of goods and services could never increase or decrease for such a system to be sustainable. Such a place could legitimately assign pebbles or seashells as their currency. That place would be purely communistic in nature… and such a place is pure fantasy and can not exist for long.
As soon as the reality of the effects of the bond notes works its way through the system, and the people realize it is totally unworkable, and intended only to steal more US$ and cover mugabism ineptitude, the fake paper will become, like the Zim dollar in 2009, worth less than the match it takes to burn it… and the people will be that much poorer, and far more desperate.
if those that bring in foreign exchange are to be rewarded 5% then those in the diaspora must also be rewarded when they send money to zims,also people who bring in forex on a monthly basis to survive.
this bond thing will never work as long as our manufacturing industry is operating at less than 25% as it is.if only we were not importing more than 75% of the goods we are utilising,then we can be able to control our own economy hence possible need of use of a local currency.therefore the first thing is to resuscitate our manufacturing industry by partnering with foreign investors who will be able to fund various projects and this will eventually create millions of jobs for the majority populacy.we also need to revisit our investor policies especially the 51 -49%.it is best for us to work and earn an amount above the PDL then buy whatever properties we need than to grab and then fail to make use due to lack of finance,planning,management etc.because i m not the project masterminder.give us a break we can turnaround this situation.where is the price control policy?it wont work when everyone is importing.and dont tell us to stop importing be cause we dont have our own cheaper goods local.i personally think you must stop play with our wits before its too late lest you regret!
Bond notes are similar to or a replica of pyramid systems. They will continue to print more bond notes until we go bust just like the bearer cheques. have we forgotten how bearer checks were introduced? it had something to do with traders and the real Zim dollar. then the apetite could not be stopped as the black???? or white??? market took over the rest is history!!!. now people say lets try it??? it is lets repeat it!!!! my foot!!!