‘Bond notes just a temporary measure, Zimbabwe needs long term solution’

Source: ‘Bond notes just a temporary measure, Zimbabwe needs long term solution’ | The Financial Gazette November 7, 2016

BARCLAYS Bank of Zimbabwe managing director George Guvamatanga says the soon-to-be-introduced bond notes were a temporary measure to ease current challenges and not a solution to Zimbabwe’s macro-economic challenges.

“The bond notes are necessary for the current problems, but there is need to come up with long term solutions to the economy,” Guvamatanga said at the Institute of Chartered Accountants of Zimbabwe (ICAZ) CFO seminar where he was speaking in his individual capacity.
He said technically bond notes would bring transacting convenience in addition to monetizing the real time gross settlement system for individuals and businesses that do not have access to electronic transacting platforms.
“The Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has absolute good intentions on bond notes from a technical aspect and life after their introduction will be better.
“Bond notes are monetizing the real time gross settlement and swiping. In simple terms they are just the physical side of these payment systems,” he said.
Introduction of the notes was mooted as part of measures to ease liquidity challenges as well as motivate exporters to sale more of their products outside the country to earn foreign currency. They will be supported by a $200 million Afreximbank facility.
According to Guvamatanga, the country requires its own transacting currency opposed to the US dollar which is a store of value. “The US Dollar is a scarce resource earned through exports and can only be used as a reserve currency.”
Guvamatanga said the journey to bond notes started in 2009 when the country adopted the multi-currency regime. “At that point in 2009, the country allowed people to take the US dollar outside Zimbabwe while exports that bring fresh capital were and are still too low. There is no country worldwide that has survived without its own transacting currency.
He said since January this year, Barclays Zimbabwe has imported more than US$70 million into the economy but that money never returned to the formal banking systems.
Guvamatanga said life after bond motes is a case of the mind set, but generally the country needs to increase production and expand exports.
“If we are not producing, we are in trouble, and currently without bond notes we are in big trouble,” he said.
He said current export levels only accounts for about US$65 million of the bond notes facility. He added that the Central Bank and Government should just ensure the facility will not exceed US$200 million.
There are fears among Zimbabweans that the Government would at some point increase the notes allocation to banks and flood the system, thereby causing hyperinflation reminiscent of the pre-2009 era. However, the RBZ has reiterated that bond notes will not go beyond the $200 million cap given that each bank will reconcile exports receipts coming through their customers’ accounts with the amount due as per the policy. FinX

COMMENTS

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    Ntaba 6 years ago

    Barclays is now part of the zany scam
    Barclays international were fined two billion pounds a few years ago
    Perhaps they can pay that fine in bond notes or Goni bearer cheques?