EDITORIAL COMMENT: Rethink bond notes

THERE is insistence on the part of the Reserve Bank of Zimbabwe (RBZ) that bond notes will be introduced next month despite clear public resistance against the proposed currency.

At least two citizens have launched court challenges against the planned introduction of bond notes. These are former vice president Joice Mujuru, who now leads a political opposition party called Zimbabwe People First, and Fred Mutanda, the proprietor of several businesses.

Yesterday, the Constitutional Court was expected to determine whether or not Mujuru should be granted access to the Constitutional Court to challenge the introduction of bond notes.

Government says Mujuru’s challenge lacks merit and that it was based on speculation since the bond notes had not yet been introduced.

Government lawyers, also acting for the RBZ, argue that bond notes would be a surrogate of the United States dollar which would be kept in reserve by the RBZ “and to which bond notes will be bonded”.

RBZ governor, John Mangudya, has indicated that he has a US$200 million guarantee from the African Export and Import Bank (Afreximbank) for export incentives, but these would be paid out in bond notes to avoid externalisation of US dollars.

So far, that guarantee is known only to the RBZ and government. An Afreximbank headquarters spokesman has refused to comment on this, referring questions to government or the RBZ.

In the absence of any disclosure of that guarantee to the public by the RBZ, its existence is being disputed. Even bankers have expressed doubt that it exists.

But the crux of the matter is that bond notes would be widely available on the market and will not only be given as a five percent incentive to exporters. Which depositors will be given bond notes instead of US dollars when they go to the banks even though their deposits were not in any way linked to the five percent incentive?

Mangudya said during his monetary policy review statement that bond notes would not be forced on people who do not like them. He told an earlier meeting of retailers that those given bond notes by their banks, but did not want them had the option of using plastic money.

This is the catch. If one refuses bond notes, the option is not to demand US dollars from the bank; one has to transact using debit cards.

While the current cash crisis has been blamed on cash merchants and foreign nationals externalising cash from the economy, it is clear government is the major culprit. It has borrowed and does not have the US dollars to pay back its debts.

It is not far-fetched to speculate that government wants to use the bond notes to repay its debts, or even clear the debts of the political elites.

The public, therefore, is right to be apprehensive because bond notes, clearly, would be ruinous to both the economy and the people. There is nothing to support this so-called surrogate currency.