The bond note stays put

ZIMBABWE’S surrogate bond note currency will continue to circulate as Treasury says it will maintain the 1:1 parity between local money and the greenback. This is despite the disparity in exchange rate that has wreaked havoc in the economy and is largely responsible for the wanton price hikes.

BY TATIRA ZWINOIRA

According to most analysts, clarity on the currency was the most pressing issue that Finance minister Mthuli Ncube had to address as the status quo gave birth to multiple pricing of goods and services as producers sought to leverage against possible devaluation.

United Kingdom-based financial services firm, Fitch Solutions warned prior to the budget that as long as the current currency regime remained, “constraints including higher-than-reported levels of inflation and businesses’ inability to access imports would constrain economic activity.”

This was due to the fact that local currency in the form of electronic money and bond notes was not adequately being ring-fenced by actual foreign currency.

“From this multi-currency basket, the US dollar is our reference currency, also applying to the 2019 National Budget. Government commits to preserving the value of money balances on the current rate of exchange of 1 to 1, in order to protect people’s savings and balance sheets,” Ncube said in his maiden National Budget for 2019 presented in Parliament yesterday.

Typically, countries that use the US dollar such as Ecuador and Panama enjoy significant amounts of trading with the United States.

Zimbabwe’s trade with the United States is low, but enjoys an over $2 billion worth of annual trading with South Africa, leading to many analysts asking the government to consider using the rand as the anchor currency.

“Going forward, the objective is to build foreign reserves and credit lines, as part of the strategy for the value preservation objective. Furthermore, it is important to note that, this value preservation arrangement is hinged on consistent implementation of prudent fiscal and monetary policies, as well as disciplined market conduct by all economic agents as espoused in the Transitional Stabilisation Programme,” Ncube said.

“There has been an upsurge in inflationary pressures during the third quarter of the year. This has been driven mainly by food prices which were responding to rising parallel exchange premiums, panic buying and artificial shortages.

“The upsurge in inflation is, however, a phenomenon arising from fiscal imbalances that have fuelled money supply.”


Ncube said the increased supply of goods following the scraping of Statutory Instrument 122 that regulated the importation of over 40 goods, would see stability in the foreign exchange market.

Treasury expects to build enough foreign currency reserves that will see the annual inflation drop to 5% by the end of 2019.

But Zimbabwe is not generating significant foreign currency earnings, leaving the central bank unable to meet demand from an import-oriented market.

“As macro-fiscal consolidation progresses, government will establish a strong inclusive framework, through an interim foreign currency allocation committee, with broader representation as was the case in the past,” Ncube said.

He, however, said government will gradually exit from exchange controls to market-based mechanisms that promote efficiency in foreign currency allocation.

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21 Comments

  1. the issue of bond notes continue to be peddled by economic dunderheads, this currency as explained by the governor only constitute 10% of the forms of money in circulation hence it is and will never be a problem in the economy neither can its removal be a cure to anything, lets focus on other bigger econimic issues.

    1. You are a fool, if you believe that the bond note is note negatively affecting the economy. And you are a DUNDERHEAD, if you buy that explanation that the governor gave.

      1. Any economic guru will not only buy the explanation but read sense in it as to conclude that 10% of a currency in circulation has wrecked havoc in a 10bln economy will be stretching it too far and any mind which advocates for removal of this currency deserve to be in a mental institution pronto.

        1. If you believe that ….why won’t you go and buy groceries with your USDollars. And if you don’t have USD…ask your “Economic guru’s” why? And please don’t lie to us that if you have the USD you will gadly walk up to OK and buy your groceries without changing to Bond or RTGS! In a nutshell….You and the so called “economic gurus” are DUNDERHEADS! Thats why Ncube is slowly tricking you into accepting full dollarisation soon.. He realised You, ED, and ZANU are too dump to accept the reality that the bond has to go!

    2. “THE BOND NOTE STAYS PUT” and so “INFLATION STAYS PUT”

      1. who says so?? you wish

    3. If its removal will not cure anything, then its introduction also did not cure anything. Then WHY introducing it? This is clear fraud prejudicing public. If government claims that the RTGs balances and US$ are at 1:1, then it is confusion to claim duty in foreign currency. The balances in banks are already in forex.

  2. So why are they demanding duties to be paid in $US if this bond note is tally against American $? Thi country is going nowhere #mbavha idzo

  3. That’s rubbish, so why are demanding duties to be paid in $us if this bond papers is. 1.1 against American $?it’s them who wants to burn cz they see people making money so vakuda kuBurner varivo manje Haaa zim is going nowhere nembavha idzi

  4. You cant say bond note constitutes 10% of the total money supply wen even RTGS are bond . It constitues 90% if not more. Bond note is very damaging as long as its there forget abt economic recovery.

  5. And they want to force phamarcies and businesses to accept bond note and trade on 1:1 yet the government itself is rejecting the bond note. If they are equal as they want to pretend why then demand duty in us. Nxaaa mhani

  6. This ia an oxymoron, what you are saying can not match, its not adding up. U say pay duty in foreign currency then you pay our salary in bond, pay tobbacco farmers with RTGS. You made us believe US and bond are equal. Why confussing yourself?

  7. My advice to Prof Ncube is to address the currency mess and after this we can start to talk about meaningful economic growth that is sustainable. If the bond note is at par with US$ as the minister said, why are we in this economic quagmire? When US$ was the primary currency in the economy from 2009, everything was stable, there was no hyper inflation and disinvestment in the country, so never no need to hoodwink us and without currency reform, that 2030 vision of middle-income country will be a day dreaming. Lets apply the right strategies to make Zim work again. No need to think of foreign aid because that failed many times ago. Lets institute sound money, arrest corruption and cut the monstrous civil service at least by 50% to 70% and retrench old people and pay them their pensions and higher high quality people with higher wages _ simple, we will be great by implementing these strategies.

  8. YOU SAY 1 BOND+ 1 USD YET YOU DONT WANT BOND TO BE USED TO PAY DUTY. YOU WANT USD. YOUR BRAINES DZAKAORA. HAUFUNGE. URI MHA—- YEMUNHU.

  9. tipei $us kubank tine mabond tipinze mota kwete zvamkutaura

  10. Ncube, we don’t want the bond note

  11. Duty remota chete ndiro riri kuda forex. Ngatisatsvakei manyepo ekuhwanda nawo. Uziwi ndihwo hwatinetsa munyika yedu. Vangani vedu vakaita economics. Iwe wakafoira commerce.

  12. Pple wl alwys love to complain, the Min dd sae tht e bond note constitutes only 10% of e money in circulation hence cannot be deemed to b e basic of an economic meltdwn.

    1. It is poison that thing called the bond note. That is why they no longer want duty to be paid using it.

  13. Well we will appreciate that Mr minister

  14. Keeping this Bosha of Bond Notes…..Zimbabwean People are suffering because of these Bosha Bond Notes….this shit must be Demonitised …

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