Zim­babwe rolls out ‘sur­ro­gate’ dol­lars

Bond notes spark fears of hy­per­in­fla­tion

Kuwait Times - - BUSINESS -

Zim­babwe yes­ter­day started is­su­ing “bond notes”, its own cur­rency equiv­a­lent to the US dol­lar, in a bid to ease crit­i­cal cash short­ages, but the move sparked fears of a re­turn to hy­per­in­fla­tion.

The cri­sis-hit south­ern African coun­try has used mul­ti­ple for­eign cur­ren­cies, in­clud­ing the green­back, since 2009 af­ter a rate of in­fla­tion that peaked at 500 bil­lion per­cent ren­dered the Zim­babwe dol­lar un­us­able. The in­tro­duc­tion of $2 and $5 bond notes into cir­cu­la­tion fol­lows the is­su­ing of bond coins over a year ago to ease short­ages of change in smaller de­nom­i­na­tions.

The coun­try has ex­pe­ri­enced a se­vere short­age of US dol­lar ban­knotes in re­cent months which prompted Pres­i­dent Robert Mu­gabe’s govern­ment to print what lo­cals have dubbed “sur­ro­gate money”. “The govern­ment is only treat­ing the symp­toms with­out at­tend­ing to the prob­lems and it’s not go­ing to solve any­thing,” Antony Hawkins, an econ­o­mist at the Univer­sity of Zim­babwe’s Busi­ness School, told AFP.

“The prob­lem is we are not earn­ing enough for­eign cur­rency and bond notes are not go­ing to solve that. It will make the sit­u­a­tion worse. “There is a say­ing in eco­nomic that says ‘bad money drives away good money’, and that is what’s go­ing to hap­pen.”

The cen­tral bank has launched a me­dia ad­ver­tis­ing blitz try­ing to al­lay peo­ple’s fears, say­ing re­tail­ers and busi­nesses have agreed to ac­cept the bond notes. But the illiq­uid Zim­bab­weans say they have no choice but to ac­cept the pseudo cur­rency.

“We had no so­lu­tion. We were caught be­tween a rock and a hard place. This is a good stop-gap mea­sure. Let’s em­brace it,” Ti­mothy Sal­imu, a for­mer bank man­ager told AFP out­side the bank­ing hall in the cap­i­tal.

Yet “for peo­ple need­ing money to do busi­ness out­side this will present chal­lenges,” he added, “but it’s too early to cry.” But even as Love­more Chi­tongo, 40, a curb­side shoe sales­man, ac­cepted pay­ments in bond notes and coins yes­ter­day morn­ing, he re­mained skep­ti­cal. “We are ex­pect­ing lit­tle change,” he told AFP. “There is no way the bond note will be equal to the US dol­lar. The mar­ket will de­ter­mine the ex­change rate.” Chi­tongo him­self was charg­ing $20 per pair of shoes-but $25 in bond notes. He would use the dif­fer­ence to buy cash on the black mar­ket, he said. The in­tro­duc­tion of bond notes stoked fears of gas short­ages over the past week and queues sur­faced at some fuel sta­tions. The govern­ment sought to calm pan­ick­ing driv­ers, say­ing the coun­try has enough fuel stocks. “We wish to as­sure the na­tion that there is no ba­sis for al­leg­ing that the coun­try will go dry in terms of fuel sup­ply,” it said in a state­ment at the week­end. De­pos­i­tors would be limited to a max­i­mum with­drawal of $150 a week. The 2009 switch to for­eign cur­ren­cies saw rel­a­tive eco­nomic sta­bil­ity be­fore the econ­omy be­gan to falter again as govern­ment poli­cies de­terred in­vestors. The eco­nomic de­cline has wors­ened in re­cent months with banks run­ning short of cash and des­per­ate de­pos­i­tors sleep­ing overnight out­side branches to be sure of ac­cess­ing their money. Those busi­nesses that have weath­ered Zim­babwe’s suc­ces­sive eco­nomic storms are grind­ing to a halt as the govern­ment re­peat­edly fails to pay sol­diers and civil ser­vants on time. The in­tro­duc­tion of bond notes has also stirred anger that has erupted into street protests. In the past fort­night sev­eral ac­tivists were beaten up and ar­rested ahead of a planned street protest to op­pose the in­tro­duc­tion of the notes.

The govern­ment said the new notes will be backed by a $200 mil­lion sup­port fa­cil­ity pro­vided by the Cairo-based Afrex­im­bank. — AFP

HARARE: Zim­bab­weans wait in a bank queue fol­low­ing the in­tro­duc­tion of new notes by the Re­serve Bank of Zim­babwe in Harare yes­ter­day. (Inset)A man holds bond notes re­leased by the Re­serve Bank Of Zim­babwe.— AP/AFP

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