Coun­try should brace for bond notes ‘side ef­fects’

Chronicle (Zimbabwe) - - National News -

EDITOR — In my view, the in­tro­duc­tion of bond notes, although laced with so many good in­ten­tions, is bound to bring with it many neg­a­tive un­in­tended eco­nomic con­se­quences.

For starters, the no­tion that the bond note should serve solely as a medium of ex­change and only recog­nis­able within Zim­babwe’s bor­ders car­ries with it the risk of be­ing not whole­somely ac­cepted.

The RBZ is miss­ing the point that for any form of cur­rency to re­ally per­form its func­tion of “medium of ex­change” it must be gen­er­ally ac­cept­able in the first in­stance.

The neg­a­tive re­sponses that have been gen­er­ated in some cir­cles should have served as a warn­ing and if the RBZ re­ally needed to ad­dress the is­sue of USD cash short­ages they should have put so much en­ergy in push­ing and per­suad­ing for the use of plas­tic money, have the in­for­mal sec­tor open ac­counts and lessen the bur­den of us­ing hard cash al­most in the ma­jor­ity of trans­ac­tions.

Ac­cept­abil­ity of bond notes can­not be forced down the peo­ple’s throat. It does not mat­ter what the RBZ says that each bond note is at par with the USD, the peo­ple know that a USD is worth more than a bond note. I fore­see a sce­nario where lever­ag­ing ac­tiv­i­ties will take place in the banks with gullible bank staffers dish­ing out only bond notes and keep­ing the USD to them­selves for black mar­ket ac­tiv­i­ties.

The USD risks dis­ap­pear­ing from the gen­eral pub­lic and it will be­come a trad­ing tool on the black mar­ket.

The RBZ seems to not have taken the risk high­lighted above into con­sid­er­a­tion. The RBZ just wants peo­ple not to queue at banks, have money (bond notes) in their pock­ets and what­ever eco­nomic is­sues that arise are not of con­cern to the cen­tral bank.

There is a real risk of spi­ralling in­fla­tion that will result from the cost of USD on the black mar­ket as traders will re­sort to buy­ing the USD and other for­eign cur­ren­cies from the black mar­ket us­ing bond notes re­ceived from the gen­eral pub­lic.

If the cur­rent USD leak­ages are the main driver of the cash short­ages the RBZ should just take the USD out of the multi-cur­rency bas­ket, or bet­ter still take the bull by the horns and in­tro­duce the Zim dol­lar so that we do not have an econ­omy where some priv­i­leged in­di­vid­u­als will have one form of a strong cur­rency over the oth­ers be­ing forced to ac­cept a pa­per they know is not worth any­thing.

Wip­ing out queues at the banks by dish­ing out Zim bond notes will lead to other un­eco­nomic queues else­where.

The econ­omy risks the emer­gence of yet an­other “par­el­lel mar­ket” where goods are priced in bonds and hard cur­ren­cies. Alex Mak­wira, Harare.

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