HARARE – The Reserve Bank of Zimbabwe
(RBZ) yesterday confirmed that the country
would start using the controversial bond
notes next month — in a move that sent
shivers down the spines of ordinary citizens
who fear the return of the despised
Zimbabwe dollar and the hyperinflation era
of the last decade.
Economists who spoke to the Daily News said
they had been caught by surprise by the
RBZ’s confirmation of the introduction of
the bond notes — given the dire state of the
economy, ongoing protests against the
surrogate currency, the slap down that
Finance minister Patrick Chinamasa had
received this week from President Robert
Mugabe, as well as the active court challenge
against the notes by former Vice President
The central bank had also last month
appeared to indicate that it was having
second thoughts aboit bringing the bond
notes into circulation, after it told the High
Court — while responding to Mujuru’s a
lawsuit — that the surrogate currency was
still at “a planning stage”.
The analysts who spoke to the Daily News
yesterday also warned that the notes could
trigger more economic turmoil and citizen
unrest in the country, after Mugabe’s
widely-criticised decision to overturn
Chinamasa’s unavoidable cost-cutting
measures, which included suspending civil
servants bonuses and taxing their
Economists described the nonagenarian’s
second humiliation of Chinamasa in successive
years as shocking, adding that this would
fatally dent investor confidence.
They also feared that the government would
abuse the bond notes to settle its domestic
debt and to help it to pay civil servants on
time I with devastating short and long term
But presenting his monetary policy statement
(MPS) yesterday, RBZ governor John
Mangudya wholly dismissed the idea that the
government would print bond notes beyond
the $220 million facility that it had agreed
“It is important to note that bond notes
shall not be forced on people who do not like
them. The bank is addressing the concerns by
planning to introduce smaller denominations
of bond notes of $2 and $5.
“In addition, the bank has proposed for the
setting up of an independent board to have
an oversight role on the issuance of bond
notes in the economy. It is critical to
emphasise that the introduction of bond
notes does not mark the return of the
Zimbabwe dollar through the back door,”
“The macroeconomic fundamentals or
conditions for the return of the local
currency are not yet right to do so. The
issuance of bond notes has a self-control
mechanism in that when there are no exports
there will be no bond notes.
“At the rate at which the country is
exporting and based on statistics…, we
anticipate that bond notes equivalent to
around $75 million will be in the market by
end of December 2016,” he added.
While Mangudya was categorical in his
spirited defence of the notes, economists and
opposition parties alike said the surrogate
currency would not work.
“From a macro-economic and financial point
of view, the introduction of bond notes will
be nothing short of a disaster. This is not a
workable and sustainable solution to the
country’s liquidity challenges.
“The Zanu PF regime will, of course, seek to
pay civil servants salaries using these bond
notes . Fundamentally however, these bond
notes have no real value. They are just
worthless pieces of paper that will lead to a
massive shortage of essential commodities
because most of our goods are imported,”
MDC spokesman Obert Gutu said.
“You need hard currency to import food and
other essential goods into the country. Civil
servants will resist payment of their salaries
in worthless bond notes and the resultant
effect will be unprecedented political and
“Whether or not the RBZ governor will
establish a board to monitor the use of bond
notes is neither here nor there. We have to
cure the disease and not just hurry to cure
the symptoms. Bond notes will be a
spectacular flop,” he added.
Gift Mugano, an economics lecturer at the
University of Zimbabwe (UZ), was among the
experts who warned that the bond notes
could trigger chaos in the country.
“There will be capital flight and even
international finance institutions will not
lend money where there is such policy
inconsistency, where the governor initially
said it was about change when he first
introduced bond coins, then changed later to
say it was to ease the cash crisis and now
it’s about export incentives.
“That is why you even see the current panic
withdrawals in banks because nobody trusts
him. Besides, the moment you see yourself
spending time trying to explain things in
business like Mangudya has been doing since
he came up with the bond note policy, then
you must know you are losing the war.
“He is only putting lipstick on a frog hoping
it will become beautiful, it won’t. The
resistance by the market will be massive,”
Mugano told the Daily News.
Responding to Mujuru’s lawsuit last month,
Mangudya described her court application as
both “premature and ill-founded”, adding,
“Indeed bond notes, outside of a policy
announced by Fourth respondent (RBZ), are
still at planning stage.
“At no point has the (Reserve Bank) stated
that bond notes are bank notes or indeed
currency as defined in our laws, in particular
the (Reserve) Act and the Bank Use
Promotion Act (chapter 24:24).
“The entirety of applicant’s (Mujuru) action
is premised on bond notes constituting bank
notes and, or currency when in fact there is
absolutely no basis for reaching this
conclusion,” Mangudya said then.
Mujuru had argued that bond notes were not
provided for under the RBZ Act, adding that
despite them being said to have the same
value as the United States dollar, they were
bound to depreciate in value.
“Money is property and a bond note, not
being money, can never substitute money.
There is therefore an infringement of the
right protected by Section 71(2) of the
Constitution to the extent that holders of
foreign currency will be forced to use or hold
bond notes in the place of their money.
“Whatever the respondents may seek to say
about the bond note, it is clearly a disguised
Zimbabwean dollar that is being introduced
through the back door. The law does not
allow a back door approach. If they wish to
re-introduce the Zimbabwean dollar they
must follow the law and call it by name given
“Just like the bearer cheques of the period
before 2009, bond notes will not be worth the
paper on which they will be printed, but will
make the poor poorer as they will be made to
lose the little valuable assets they have, such
as livestock, to the privileged few who will be
in possession of worthless bond notes,”
The fears of the country receding into the
hyperinflationary era of 2008 were
heightened this week by Mugabe’s irrational
decision to reverse the belt-tightening
measures which Chinamasa had announced
during his mid-term fiscal policy review
statement last week — without offering any
viable alternative measures of his own.
The increasingly frail nonagenarian, the only
leader Zimbabweans have known since the
country gained its independence from Britain
in April 1980, is facing the biggest challenge
to his 36 year rule.
Since the economy began experiencing
serious turbulence, including witnessing
banks running out of cash, the government is
under growing pressure as angry
Zimbabweans have mounted seemingly
HARARE – The Reserve Bank of Zimbabwe