Banks ready for bond notes roll­out

Chronicle (Zimbabwe) - - Front Page - Pros­per Ndlovu

BANKS say mea­sures to mit­i­gate the per­sis­tent cash short­ages be­ing ex­pe­ri­enced across the coun­try are be­ing im­ple­mented, the sit­u­a­tion set to ease markedly with the com­ing of bond notes later this month.

Zim­babwe has been ex­pe­ri­enc­ing cash short­ages since April and au­thor­i­ties blame the trend on ram­pant hoard­ing of the United States dol­lar and its ex­ter­nal­i­sa­tion. Il­licit fi­nan­cial flows cou­pled with the in­flux of cheap im­ports, also drain liq­uid­ity in the econ­omy re­sult­ing in trade deficit, es­ti­mated at about $2.5 bil­lion, ac­cord­ing to Zim­stat.

Re­spond­ing to e-mailed ques­tions yes­ter­day, Bankers’ As­so­ci­a­tion of Zim­babwe (BAZ) pres­i­dent Dr Char­ity Jinya urged calm in the trans­act­ing public.

She said the cash cri­sis would not be solved by banks alone as she en­cour­aged de­pos­i­tors to work with the mon­e­tary au­thor­i­ties in re­vers­ing the prob­lem by em­brac­ing use of plas­tic money and bond notes.

“A num­ber of fac­tors have cul­mi­nated in the cur­rent cash short­ages and col­lec­tive ef­forts are be­ing made by var­i­ous stake­hold­ers to mit­i­gate the chal­lenges. These in­clude the in­tro­duc­tion of bond notes by the RBZ, which are aimed at stim­u­lat­ing ex­ports,” said Dr Jinya.

“The RBZ also re­duced cash ex­port thresh­olds for trav­ellers, Govern­ment is now re­strict­ing un­nec­es­sary im­ports, while banks have also stream­lined daily cash with­drawals and are en­cour­ag­ing the use of elec­tronic and dig­i­tal pay­ment plat­forms.”

With de­pos­i­tors con­tin­u­ing to flood bank­ing halls es­pe­cially on pay days, banks have been forced to re­duce with­drawal lim­its, some to as low as $50 per day as oth­ers fail to avail cash to clients al­to­gether. This has also put pres­sure on mo­bile money plat­forms, which have sim­i­larly capped cash-outs. The cash­back fa­cil­ity in ma­jor re­tail out­lets has also not been spared.

Dr Jinya, how­ever, dis­pelled fears the sit­u­a­tion could erode con­fi­dence in the bank­ing sec­tor, say­ing de­posit trends re­main on a pos­i­tive note.

“You will note that fol­low­ing the an­nounce­ment of [the in­tro­duc­tion of] bond notes in May 2016, the statis­tics re­cently re­leased by the cen­tral bank show that money sup­ply and bank­ing sec­tor de­posits con­tinue to in­crease steadily, with the an­nual broad money sup­ply growth rate in­creas­ing by 1.71 per­cent­age points to 14.84 per­cent in July 2016, from 13.13 per­cent in June 2016.

“To­tal bank­ing sec­tor de­posits stand at just over $6.125 bil­lion as at 31 July 2016, up from $5.91 bil­lion in June and $5.67 bil­lion in March 2016,” she ex­plained.

The bankers’ group said it was geared to roll out bond notes in sup­port of the Govern­ment ini­tia­tives.

Re­serve Bank Gov­er­nor Dr John Man­gudya has said bond notes will ini­tially be is­sued in de­nom­i­na­tions of $2 and $5 notes with an es­ti­mated $75 mil­lion to be in­jected in the econ­omy by De­cem­ber this year.

“Banks are ad­e­quately pre­pared for the in­tro­duc­tion of the notes and will take all nec­es­sary steps to en­sure a smooth roll­out of the in­stru­ments in line with the reg­u­la­tory au­thor­i­ties’ ex­pec­ta­tions,” Dr Jinya added.

This week Vice Pres­i­dent Em­mer­son Mnan­gagwa re­vealed that the Govern­ment was work­ing on craft­ing a law to sup­port the in­tro­duc­tion of bond notes as the coun­try needs a mode of trans­ac­tion it can con­trol.

VP Mnan­gagwa said the fi­nan­cial ser­vices sec­tor was con­strained be­cause the le­gal ten­der of the coun­try was an­chored on for­eign cur­ren­cies, hence Zim­bab­weans should em­brace bond notes.

“Let me as­sure you that it is not a dream. It is go­ing to be re­al­ity. We are go­ing to live with it. Those who can eas­ily re­alise that re­al­ity should be­gin to ac­cept that the bond notes will be with us. We are in the mid­dle of craft­ing leg­is­la­tion to in­tro­duce the bond notes.

“The cur­rent fi­nan­cial ser­vice sec­tor in the coun­try is con­strained by the fact that cur­rently the le­gal ten­der of the coun­try is an­chored on cur­ren­cies that we have no con­trol over.

“We need a mode of trans­ac­tion which we can con­trol in the coun­try on the ba­sis of se­cu­rity pro­vided by the Exim Bank $200 mil­lion,” he said.

In­dus­try bod­ies and ex­perts have also backed the bond notes ap­proach de­spite its crit­i­cism by some sec­tions of so­ci­ety.

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