Zim bond notes to reach half a billion: Central bank chief

File: AFP
File: AFP

Harare - Zimbabwe's central bank chief says the country will print an extra 300 million dollars’ worth of bond notes, despite an earlier promise not to exceed the 200 million figure.

Any mention of money printing in Zimbabwe fuels fears of a return to hyper-inflation and the black market trade in scarce foreign currency that peaked in 2008.

Bond notes were introduced last November to ease chronic shortages of US dollars, and to encourage exporters who earn the country foreign currency.

'Drip feed basis'

The central bank has so far fed 175 million dollars’ worth of the notes, in denominations of two and five dollars, into the economy.

But in a monetary policy statement on Wednesday, Central Bank Chief John Mangudya said another 300 million dollars of the notes would be released, backed, like the first 200 million, by a loan from the Cairo-based African Export-Import Bank (Afreximbank). 

"As like under the 200 million US-dollar facility, the (central) bank will release the bond notes into the market on a drip-feed basis," he said.

'Inefficient circulation of money'

Until now, bond notes have largely kept their value against the US dollar because of their scarcity. There are fears that having extra notes on the market will fuel a black market trade in US dollars.

Massive bank queues persist outside most commercial banks around the country, as depositors battle to withdraw their money, mostly in bond notes and coins. 

Mangudya said one billion dollars’ worth of cash was circulating in Zimbabwe, but was mostly in the informal sector.

"The inefficient circulation of money is significantly causing shortages in the formal economy and the banks," he said, adding that individual Zimbabweans would only be able to take 2 000 US dollars with them on foreign trips.

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