Bond notes discount will propel inflation: IMF

INTERNATIONAL Monetary Fund (IMF) mission chief on Zimbabwe, Ana Lucia Coronel, has expressed concern that growth in bond notes discounts in the parallel sector would increase inflation, which will impact on the supply of certain goods and services.


Speaking via satellite conferencing on Friday, Coronel said although the discounts have been relatively stale for some time, they have already caused an increase in inflation.

“Even though the government has announced parity of one as one, there is a parallel market function and we have seen some different discounts for the bond notes and the real time gross settlement balances and even on the different bills that are used as a method of payment. These discounts have been relatively stale over time, but even so they have already caused an increase in inflation,” she said.

“If the discounts go higher, because the government continues to have deficits and these deficits continue to be financed, this way, then it could be expected that the discounts will go higher. How higher is very hard to know, but what is clear is that higher discounts will have an impact on certain goods and services and, therefore, inflation could go up.”

Coronel said there would be a need for limiting the sources of financing the deficit which requires going through fiscal adjustment.

In the recently released IMF Article IV consultations on Zimbabwe, bond notes are trading at a 5 to 7% discount vis-à-vis the US dollar, and electronic balances reportedly exchange at a 15 to 20% discounts and continue to grow.

The report found that combined with the trade controls, the bond notes discounts have led to an uptick in inflation, which has increased to a quarterly annualised rate of 3,4% in March 2017 (compared to 0,7% in December 2016).

The fiscal adjustment that IMF recommended be changed, among others, was curtailing the monetary deficit financing, which could have a rapid and escalating impact on the price level.

IMF revealed during the Article IV consultations, Zimbabwe agreed that deficits at current levels could not be sustained, but brushed it aside as one-off shocks and the country’s international isolation.

“Fiscal deficits would continue at a higher than optimal level, which will still force some monetary financing, but the authorities, conscious of the risks of hyperinflation, will restrain the issuance of bond notes. The consequent rise in inflation would have an impact on real wages, thereby restraining the deficit-to-GDP (gross domestic product) ratio,” the report said.

“With an over appreciated real exchange rate, US dollars would become increasingly scarce or only be available at a premium.”

In such a situation, IMF predicted that the Reserve Bank of Zimbabwe would likely intensify administrative controls to try to enforce parity and ensure that the banking system continues to contribute to deficit financing.


  1. They are at par with one of the world’s strongest and most stable currencies, but that doesn’t justify the high demand

    1. Don’t they say “Bad Money drives away Good Money” or something to that effect!

  2. we are going back to 2008

    1. “we are going back to 2008” We are very much heading that way full steam, mate. Our stupid and idiotic government knows no other way than to destroy things. Totally clueless, selfish, corrupt and unpatriotic idiotic leaders we have.

  3. Madirativhange

    I am not surprised. I mentioned this when bond notes were introduced. But because i am just a ME, nobody dare to listen. The truth is, this was initiated by Government when they started paying 5% “incentive” for all foreign currency brought into the country. So the 5 to 7% mentioned in this report is the one set by government from day one. If the bond notes were at par with the USD, why do we need incentives? I know there are always reasons given, to attract foreign currency blah blah, its not true or lets say it was a blunder. These are grave blunders or it is a deliberate vehicle to create opportunities to feed the pockets of the few elite while avoiding fixing the real causes of foreign currency flight. The few elite (them) are the ones who have businesses and friends benefiting from this incentive as they send in money and take it out immediately, and continue to do that. Who would stop running a business that has no real running costs but earning 5% for every transaction. This is a continuation of self enriching strategies that started a long time ago. An example is at GMB. Government subsidized the price of maize to millers while Government (GMB) buy at higher prices. Who is running the so-called milling companies – them. Right, they buy 10 tons from GMB, use only 2 tons (if at all that so called milling company exists), sell back the 8 tons to GMB and make profits. So you can now see the similarity of the bond notes incentive to this GMB scheme. Food for thought. ~~ Madirativhange, I am out.

  4. Some buscuits which were going for 45 cents last week are now 65 cents meaning there is a definite increase in prices due to the bond note use.

    1. Muramabatsvina

      Apa warova dede nemukanwa. Vanhu vapererwa ava.

  5. refugee in my own country

    @madirativhange point iyoyo bro

  6. refugee in my own country

    @madirativhange point iyoyo bro lining their already fat pockets vaakudyira kuenda ka its about sunset now

  7. BONDS EQUAL US$ %?????????????????????????? KPAP !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    THIS IS GONO MK2 !!!!!!!!!!!!!!!!!!!!!!!!!!

  8. ndo chokwadi ichocho. Ne Command Agriculture they are also lining their pockets. Its a mess.

Leave a Reply

Your email address will not be published. Required fields are marked *