The Reserve Bank of Zimbabwe (RBZ) has said bond notes are not a surrogate Zimbabwe dollar for they are not currency, but a financial instrument issued at par with the United States dollar.
By Munya Mugari,Our Reader
A currency is defined as a system of money in general use in a particular country.
What is clear is that the RBZ did a poor job of explaining the issue of bond notes. Legal experts contend that the issuance of this “fictitious” currency is unlawful.
This has been corrected by Statutory Instrument 133 of 2016, which provides a legal framework for the bond notes as acceptable legal tender. I am not a legal expert, but what seems to be apparent is that these laws are being promulgated to legitimise something that is clearly illegitimate. Zanu PF politicians have come out in full force to support the “noble” idea. The messages are very different, maybe illustrating how much the bond notes issue is understood by the intended users.
Buhera South MP Joseph Chinotimba has a video circulating on social media, where, in a language similar to English, he explains that bond notes are to provide change and, hence, their introduction will not cause inflation. Someone has forgotten to tell him the reason for introducing the bond notes: The Zimbabwean economy has collapsed.
Facts on the ground point to a bleak situation, where more than 90% of collected revenue is channelled towards the ever-increasing government, leaving little to nothing for capital developments that attract foreign investment.
Improvements in revenue collection are going to remain a distant dream because the tax base is shrinking along with the shrinking industry and manufacturing base. While the RBZ says that bond notes are an export incentive, a claim many find hard to believe in a country that is a net importer, I view this move as an attempt by a desperate government to find another source of revenue for their spiralling spending through printing money.
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In their minds, ceteris paribus (with all other things remaining equal), they print $200 million worth of bond notes, most likely more, and they siphon depositors’ funds to fund their luxuries and depositors will get the bond paper, sorry, notes. In real life, ceteris paribus only works in economic theory, the legislated bond value will not hold in an economy where public trust is absent and where authorities are known thieves and liars.
In my opinion, this move will cause more damage than good.
RBZ governor, John Mangudya and Finance minister Patrick Chinamasa have not taken into account the unintended effects of the bond notes in an environment tainted by past and present lies.
People are going into panic withdrawal of cash from the banks, opting instead to bank under their pillows.
Those earning US dollars will not be banking them as they see through this money-raising scheme. A monetary parallel market is going to emerge and the value of the US dollar will be determined by the forces of supply and demand and since there will be shortage of US dollars, we need to brace ourselves for a very high US dollar value, while the bond notes value will plummet.
Since the US dollar is the currency needed and accepted in international trading and since Zimbabwe is a net importer, the expensively acquired US dollar will result in expensive imports.
The expensive imports and the general shortage of fuel will lead to general shortages, constantly increasing prices and the government will jump in and control prices, leading to more shortages.
