Zimbabwe

Is Zimbabwe's bond note about to crash?

2017-02-07 13:16
File: AFP

File: AFP

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Harare - Here it is: the first hint that Zimbabwe's bond note to US rate is about to start moving. And not in a good way.

A worsening forex squeeze since the introduction of Reserve Bank Chief John Mangudya's bond notes in November last year mean that there is "a recipe for exchange rate pressure between bond notes and the dollar", Zimbabwe's Standard newspaper is reporting.

Mangudya and President Robert Mugabe's government insist the bond note to US exchange rate is 1:1.

It has been, largely, in the last two months. 

But as forex in the official market dries up as companies that depend on imports find they're not able to send money out of Zimbabwe, there are real fears the black market will re-emerge, sending the value of the bond note plummeting and taking Zimbabwe back to the days of hyperinflation seen from 2006-8.

Few Zimbabweans are willing to speak on the record about this, understandably.

The Standard quoted an unnamed economist as saying: "If you are desperate, you will buy the dollar at a higher exchange rate."

Black market 

There have been worrying signs. Without explanation the central bank introduced the 5 US bond note last week, instead of next month as had been promised. 

When the bond note was first brought in, the central bank said the amount of the paper currency that individual Zimbabweans would have in their possession should never exceed 19 US and so there would be no opportunity for the black market to resurface.

That's just not happening: if you are lucky enough to get cashback at a major retailer, your 40 US will likely comprise 30 US worth of bond notes, News24 saw last week.

And in yet more evidence of things getting tighter, Standard Bank Zimbabwe has just informed its clients they can't use their Visa cards when they travel outside the country.

A statement says you can apply to the bank for "special consideration" but that provision offers little comfort: clients must submit a detailed list of everything they expect to spend their money on an outside trip. Because of the Zimbabwe shortage of cash, some have been travelling to countries in the region to try to access cash from their accounts there for use back home.

Bank cards 

Commenting on Twitter on these worsening shortages, prominent law lecturer and commentator Alex Magaisa said it was "foreseeable". He referred to Gresham's Law, which says that bad (or less valuable) money eventually drives out good (or more valuable) money.

At the moment "banked" Zimbabweans - and that is by far from most of the population - rely on bank cards to pay bills and supermarkets. If the black market for USD reemerges in a big way, that may no longer be an option.

US-based Professor Steve Hanke, who monitored the dizzying freefall of Zimbabwe's dollar in the pre-2008 era, has warned that bond notes will likely suffer the same fate.

What he's seeing now simply confirms his predictions. He tweeted on Tuesday: "Reserve Bank of Zim's bond notes are a joke."

Many Zimbabweans already know that. 

Read more on:    zimbabwe  |  southern africa

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.
X
NEXT ON NEWS24X

SHARE:

Inside News24

 
/News
Traffic Alerts
Traffic
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.