Bond notes debate rages

Source: Bond notes debate rages | The Herald September 15, 2016

Government should reassess the bond note project which has created loss of confidence in the economy, in particular the financial sector, and instead negotiate for the $200 million African-Export-Import Bank to be used to increase liquidity in the South African rand to the economy.According to a compendium of key policy research released to mark the end of the five-year-long USAID Strategic Economic Research and Analysis programme, a monetary regime was needed to restore competitiveness in Zimbabwe and provide sufficient liquidity in the economy, and the closest to achieving these objectives was the use of the rand.

“Using the rand would enable the economy to ride on the competitiveness of South Africa. The rand would inject liquidity in the economy because most of Zimbabwe’s external trade is conducted with South Africa,” read the study.

“Rand currency circulation would be a two-way flow unlike the dollar, which has multiple flows. In addition, South African banks operating in Zimbabwe could be called upon to provide rand liquidity.”

Recently, the Reserve Bank of Zimbabwe governor Dr John Mangudya said bond notes would still be introduced at the end of October as they would be an export incentive which would get the economy back on track. He is expect to further support this measure when he presents the mid-term monetary policy on Thursday.

The policy research conducted by USAID-SERA, Confederation of Zimbabwe Industries and National Economic Consultative Forum, highlighted that the change of the currency alone was not going to solve the initial position of the current cash shortage.

“Because Zimbabwe’s foreign reserves and hard cash balances, including nostro accounts, have been severely depleted, randisation would require external borrowing to inject rand liquidity.”

According to data from the Reserve Bank of Zimbabwe the estimated amount required to restore hard cash imbalances to 20 percent of total system deposits is around $590 million.

“The Afreximbank facility of $200 million originally meant for bond notes can be used for this purpose. Government could also run down its stock of foreign reserves estimated at about $350 million.”

Further to that, the study says the RBZ should progressively reverse its policy that has cut off foreign inflows and remittances (including export proceeds) from being retained in bank’s nostro accounts so as to instil confidence in the banking system.

The study also calls on RBZ to put the mining sector on top of the priority list in the allocation of foreign currency. “Mining companies should not line up for foreign currency to order supplies as this is akin to killing the goose that lays the golden eggs. Allowing the mining sector to access foreign currency on demand will restore confidence and expedite the generation of foreign receipts.”

Other recommendations improving trade competitiveness, promoting tourism, removing impediments to FDI including the repealing of the Indigenisation Act and restoring confidence in the banking system so that money flows through system.

For the past five years, SERA has supported many of Zimbabwe’s economic institutions; key among its milestones being pioneering the research leading to the current Government-wide doing business reform work as well as thematic research in pensions, cost drivers, mining and public sector wages. — Wires.

COMMENTS

WORDPRESS: 6
  • comment-avatar
    R Judd 6 years ago

    What debate? Everybody knows that Bonds are a very bad idea and that they will be forced down out thoats.

    All this piffle about Rands and balance of trade is entirely beside the point

    • comment-avatar
      Joe Cool 6 years ago

      There’s always some dumb plan behind these Herald articles – this one is presumably to poison us against the US$ and make us clamour for the erratic rand which will hit 20 to the US by 2018 when the next election fraud is intended to be upon us.

  • comment-avatar
    TJINGABABILI 6 years ago

    BAD BOMB BOND TISSUE!

  • comment-avatar

    Please bring them tomorrow the sooner the better ,then we can collapse for a third or fourth time.Sorry I have lost count!Great before Christmas.

  • comment-avatar
    ntaba 6 years ago

    Bond notes are a wonderful Zanu idea. I think that the Zanu government should print and float about a hundred trillion, billion Bond notes – the luxury they can afford. I mean – it is only money – so why not? Zimbabwe has been over blessed with genius status politicians like Mugabe and his mates. They have created the best economy in the world with the best human rights record in the world and the happiest people in the world as well. They were ably assisted by none other than Malcolm Fraser, Margaret Thatcher, Henry Kissinger, BJ Vorster, Lord Carrington and Lord Soames. Her Majesty the Queen followed on with a Knighthood for Sir Robert the Liberator. We are all so truly blessed by all these do gooders for all looking after the country and its people via such a wonderful loving gentleman like their dear Robert. How lucky we are.

  • comment-avatar
    Gohore 6 years ago

    Editor.

    I’m sick and tired of these so called Dr, Prof or such other titles who produce absolutely nothing to justify their egos and consumption orgies against a dying country.

    Let’s get on with it. Bring your bond notes. We the uneducated will show you that once again your rented or honorary degrees mean for nothing! We will decimate the bond notes like you never seen before! Watch this space.

    Chimunhu kindii chinodada ne7degrees dzekubira nyika and then proudly announce they lost 15billion? Then demand that they alone have rights to get first class health services in Singapore and Dubai while our mothers die of lack of functional facilities!?