Tendai Kamhungira 25 April 2017
HARARE – Former Industry and International Trade minister Nkosana Moyo has
slammed bond notes, arguing the surrogate currency is “not the answer” to
the country’s deepening cash crisis.
The bond notes – valued at par with the United States dollar – were
introduced in November last year by the Reserve Bank of Zimbabwe (RBZ) in
a desperate attempt to ease the liquidity crisis, but since their advent,
the greenbacks have disappeared from the market, worsening the situation.
“The answer is not bond notes,” Moyo said in an interview with
Capital26free, a podcast network station.
The respected economist – famed for publicly speaking out against attacks
on businesses and factories by war veterans and later uncharacteristically
resigning from President Robert Mugabe’s Cabinet about a year after his
appointment – said “the answer is to stop the haemorrhage of where our
money went and continues to go. Once we stop that, the issue of bond notes
will not even arise”.
” . . . somebody is responsible for our money disappearing from the banks
and they need to give us an honest answer,” Moyo said.
“When we dollarised, we literally – all of us without exception – zeroed
our savings to nothing. So every single dollar that is in my account, I
earned from that day onwards . . . where did it go?” he queried.
The executive chairperson and founder of the Mandela Institute for
Development Studies’ sentiments come at a time the country is experiencing
crippling cash shortages.
US dollars have almost vanished from the open market as banks refuse to
dispense the currency to clients, forcing consumers to increase the uptake
of bond notes, which have also been disappearing from circulation.
“The starting point is you need to ask the banks, because the banks have
not been honest with us, where did our money go? Because if I put my money
in the bank and it’s not there, it must have gone somewhere. It’s either
the bank lent that money recklessly and lost it; or they gave it to
somebody else. They need to account for it and that’s our starting point,”
Bond notes are used solely for domestic commerce, as traders still require
US dollars to import goods.
Zimbabwean traders have resorted to the black market, where they pay a 25
percent premium to get scarce US dollars.
This premium is ultimately absorbed by consumers through final goods and
service price increases.
Retailers also place different price tags on goods depending on the
currency used to pay.
However, low confidence in the banking system led to consumers rapidly
withdrawing hard cash from banks. As a result, banks implemented a
withdrawal limit on consumers and businesses.
So far, the central bank has injected $120 million worth of bond notes
Last week, RBZ governor John Mangudya told State media that there is
around $900 million cash in circulation.
“This, together with bond notes, is substantially in line with best
practice where the ratio of cash in circulation to deposits is around
10-20 percent. We cannot call it a cash crisis, but a crisis of
indiscipline, productivity and lack of business management.
“We are now invoking provisions of the Bank Use Promotion Act to ensure
and encourage people like traders, wholesalers and other dealers to bank
“There is need for a paradigm shift from a consumption type of economy to
a productive one,” the RBZ chief said, adding authorities were importing
$60 million per month and promoting “plastic money” as part of measures to
make cash available.
Moyo, a former World Bank International Finance Corporation staffer, said
the country’s economy continues on a downward spiral because of the
prevailing situation, where factories are closing on a daily basis,
leading to many people losing their jobs.
“The government is not facilitating (investment), the government has never
taken the view it is responsible for growing the economy,” he said.
“The government has continued in a mind-set which says the economy is an
enemy and all the legislation that they put in place, whether its labour
legislation or whatever is meant to punish the economy, but everything
else that a country does is a product of the economy,” he said.
Moyo also said politicians were living large, contrary to the economic
situation on the ground.