By Nigel Nyamutumbu
As I made my way to work on the morning of the 5th of May 2016, I was alarmed by poster news headlines announcing plans by the Reserve Bank of Zimbabwe (RBZ) to introduce bond notes.
Instinctively, the immediate temptation was to immediately understand the full story by getting myself copies of all the newspapers carrying this potentially life changing announcement.
I instantly retained composure and my senses as I told myself that it was only a matter of minutes before I would reach my work station and get to read all about it from our office newspapers supplies.
In this whole thought process, my mind pondered on some questions or should I say worries, which a lot of Zimbabweans have been echoing in various dialogues and conversations.
Could this be the return of the Zimbabwe dollar? Are we not establishing, or rather revitalising the black market as a result of a lack market confidence in these bond notes?
What’s going to happen, I wondered.
At that point I wasn’t necessarily even thinking at a macro-economic policy level neither was I thinking of legal ramifications or economic implications. I was merely thinking as an individual worried about whether if I was going to receive bond notes in exchange of my US$ earnings and deposits.
I was picturing a scenario where I would buy goods using the much sought after greenback only to receive bond notes as change.
Also, I wondered whether there is going to be need for devaluing my bond notes in order to get the US$ should I need to go outside of Zimbabwe.
All these questions required practical economic responses, or as I later learnt legal answers. In this myriad of confusion, I sadly did not have answers and all I could picture was doom.
Besides, I am neither a lawyer nor an economist and hence would not be able to authoritatively analyse the import of the introduction of bond notes from an economic and legal perspective.
However as a media practitioner, I take keen interest in national developments and thus took it upon myself to inquire more on this matter by first analysing the reasoning behind the introduction of bond notes by the Reserve Bank.
The reasons were not difficult to establish.
For starters, since the beginning of the year the RBZ governor has been making policy pronouncements in respect of economic challenges bedevilling the country, including cash shortages, unauthorised externalisation of the US$ as a result of a much higher percentage imports compared to exports.
In simple terms we are taking more US dollars out of the country importing goods – including small products such as matches to light our braai fires – than the US$ coming into the country by way of exports or even Diaspora remittances.
For some reason our relatives in the Diaspora are not sending money in as they used to, neither are they investing in this country by way of building houses or starting businesses for example.
The Governor further bemoaned how Zimbabweans prefer to use cash as opposed to electronic platforms, including transfers, POS / swipe machines and mobile or internet banking among other platforms.
Arguably, most Zimbabweans are not making use of these facilities as the majority operate within the informal sector, which largely deal on a cash basis.
Besides, most places that Zimbabweans frequent do not have POS machines, including churches, fast food outlets, stadiums, braai spots, beer halls and clubs. Most government and council departments operate on a cash basis and the same can be said of the transport industry where most filling stations and transport operators do not have electronic sale facilities.
And because there is huge demand for the US dollar, this cash crisis was always coming.
Like any right thinking central bank with a mandate to control the nation’s money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis, the RBZ secured US$200 million from the Africa Export-Import Bank (Afreximbank). The US$200 million will be released from Afreximbank’s nostro and export facility.
A nostro account is a bank depository held in a foreign country and denominated in the currency of that land. Such accounts essentially facilitate import and export payments, especially in the case of inter-state transactions.
In other words, the US$200 million is secured and redeemable as cash.
That the US$200 million is a loan, for a country reeling in serious debt is neither here nor there and is a more profound discussion beyond my expertise.
I will not even try and analyse how Zimbabwe is planning to offset this debt or discuss the 5% incentive for exporters and the percentage conversion of US$ exports to other currencies seeing that as an individual I just want to understand where these bond notes are coming from and where we are going.
For example, some may ask why the RBZ would want to incur additional costs by printing bond notes to depict the US$200 million secured from AfrieximBank.
The Bankers Association of Zimbabwe (BAZ) thinks this makes sense and is in support of this move for reasons mentioned above. I also personally think it makes sense as I do not see any other way out of this cash crisis, unauthorised externalisation, low deposits and high imports.
If anything I really feel sorry for the Governor.
But like most Zimbabweans I will not pretend to be ahistorical and not be sceptical about the prospects of the Reserve Bank of printing more bond notes than the secured US$200 million to service government’s high wage bill.
I haven’t forgotten the casino economics or was it kiya-kiya or feja feja monetary policies during the hyper-inflation era and am sure because of that most Zimbabweans are to struggle to accept bond notes as a means of trade.
Most Zimbabweans simply can’t imagine their hard earned US dollars being converted to bond notes simply because they do not trust the value of this ‘currency’ and that they do not have confidence in government’s sincerity in addressing the liquidity crunch.
The RBZ should either consider introducing the bond notes for specific sectors, perhaps the fuel industry where these notes would work as ‘coupons’ or have safe landing for this policy by introducing the bond notes in smaller denominations.
Either way the RBZ or broadly the government has to embark on a trust and confidence building process, which would build public consensus on this monetary policy. – feedback email@example.com