AT the onset of the liquidity crisis, the central bank authorities availed plans to introduce and print $200 million bond notes, which were said to be backed by a loan facility from Afreximbank and were supposed to be introduced solely as an export incentive. The central bank governor John Mangudya believed this would boost exports; increase foreign currency inflows into the country and help to cure the liquidity crisis.
The Reserve Bank of Zimbabwe (RBZ) plans were largely criticised and the nation showed openly that it was against this idea, of which the monetary authorities decided to introduce the bond notes against this public resistance.
The effects of bond notes have been so visible even before their implementation, the United States dollar disappeared from the streets, money changers got their jobs back that they had lost in February 2009 when the economy was dollarised, prices of goods and services increased as bond notes are losing their value in the black market, while local importers have to purchase the foreign currency to purchase products mainly from South Africa since our country is failing to produce.
This writer has also observed that the local banks have stopped issuing United States dollars in withdrawals from the time bond notes were introduced. It is not clear whether they are not receiving United States dollars in their deposits.
This can be a clear sign that people dislike these bond notes and whenever they get US dollars they are reluctant to release them and whenever they do, they will be importing hence externalisation continued.
The monetary authorities introduced a measure that could not cure the causes of liquidity challenges in Zimbabwe.
We all agree that the problems currently facing the country are deep-seated in the structure of the economy and need robust measures to boost production, which are obviously long term.
However, in the short term, since the economy could no longer sustain the use of US dollars, then certainly something had to be done but obviously not implementing bond notes. That is the greatest mistake the monetary authorities made.
Recently, Mangudya completely ruled out the idea of adopting the rand as our trading currency, instead of using bond notes. The reasons that Mangudya is against the rand are completely baseless and lack economic sense.
It’s not the first time that the governor has rejected the rand as an option and then fail to cite proper reasons to support his argument. The President of Zimbabwe Robert Mugabe himself in his 2017 birthday speech and interviews highlighted the need to adopt South African rand as our trading currency and pointed out that he had advised the monetary authorities to do so, but they keep on saying we will do that. When Governor? The nation is suffering because of these bond notes, the cost of living has increased, the incomes are being eroded and time is moving.
Governor, you argued that the rand loses value or more simply it is volatile hence exchange rate challenges were experienced as of late.
South Africa is our major trading partner and Zimbabwe is largely importing from SA, if we adopt the rand, these exchange rate problems will be a thing of the past since we would simply use that same currency to purchase our requirements from South Africa.
The rand might be volatile, but what would you say with bond notes, they are valueless. You introduced them at par with the US dollar, but now they are losing that value. We thought when you introduced bond notes you were also going to make sure that whenever someone is in need of the rand, one could just purchase it from the formal sector, but to my surprise banks are not selling this rand.
One has to go to the informal sector were they are rating the two currencies separately, the US dollar and the bond note, its cheaper purchasing with US dollar than with the bond note. This has caused retailers to increase prices of the commodities they are selling, knowing that they will need to buy the rand from the informal sector using bond notes, which is costly. These costs are just being passed on to the consumers whose incomes are not increasing. Are you considering that in your policy formulation?
Governor, you also pointed out that the rand would be externalised as well, we know that, but we are saying not to the same extent as the US dollar. You earlier argued that Zimbabwe had become a fishing pond for the much-needed US dollar and people were coming from all corners of the world in order to take this US dollar and go away with it. Are they going to do the same on the rand?
Surely, there would be no reason for someone to come from China in order to get the rand, the rand would just be externalised back to South Africa where we could just import it easily and cheaply, unlike the US dollar that we were importing at a much higher price.
People’s wealth and savings could be much more secured in the rand than in bond notes and adoption of the rand would bring much security and confidence in the financial sector unlike with the bond notes.
I am not saying that adoption of the rand would be a permanent solution to the problems the nation is facing, but it can act as a temporary solution to this liquidity crisis that we are currently facing whilst we will be crafting long term robust measures to boost production so as to be able to sustain our local currency.
The nation would lose less with the rand unlike with bond notes and we are saying the rand is a better devil as compared to the bond notes.
It was very difficult to pay for the costs of production using US dollar, which is a hard currency and then try to trade with other countries that uses weaker currencies. Our exports have been expensive and uncompetitive in the international market which significantly reduced our export earnings.
It can be much beneficial for the country to rather adopt rand which is a weaker currency and this can help to boost Zimbabwe’s exports. Dollarised countries such as Ecuador and Panama are able to remain competitive in terms of trade due to them having access to the American financial system unlike Zimbabwe, which is under sanctions.
Governor, are you experiencing the cash crisis that the ordinary Zimbabweans are experiencing since late last year.
Have you ever slept in bank queues, especially in this winter season? When you capped the maximum cash back limit at $20 per day per individual what were you planning to achieve?
Have you ever checked purchasing products with plastic money from these big formal retailers is expensive as prices are nearly 60% higher than purchasing with cash from small informal traders?
You projected that inflation rate in 2017 will be slightly above 2%, but not because of economic recovery as you said but because of the negative effects of bond notes, policy inconsistency especially on the Statutory Instrument 20 that was done by your counterparts in the Ministry of Finance and largely due to the use of plastic money.
Your policies are insensitive to the poor and are out of touch with the situation on the ground. You also fail to realise that we live life once and you might be living large and you would think that everyone is in that comfort zone, but the reality is that Zimbabweans are suffering and much of this is being caused by poor formulation of policies and policy inconsistencies.
We have policymakers, who implement a policy without assessing its possible impacts, criticised by the nation and then publicly admit that they had over looked the possible impacts of their actions. Are you aware that you will be experimenting with people’s lives which they should enjoy only once?
Governor, on a telephone conversation that I had with you on August 13 2016, you told me that I should question you when these bond notes fail to yield positive results.
I am asking you now; tell me the benefits that these bond notes have brought to our nation and may you publicly cite meaningful reasons why you would not take the adoption of the rand as a better option.
Blessing Machiva is an economist and he writes in his own personal capacity. Criticisms and comments can be forwarded to email@example.com or WhatsApp number +263 774 601 040 or call 0773 836 435.