What is the future of the bond notes?

EVER since the introduction of bond notes by the Reserve Bank of Zimbabwe (RBZ) as an incentive meant to stimulate production and, to a certain extent, solve physical money shortages on the local market, there has always been a vocal constituency that is hell-bent to see the project fail.

In the past few weeks, deliberate messages have been planted on social media platforms in order to discredit bond notes as a viable and stable medium of exchange.

This has caused unnecessary panic in the market. People are now buying anything and everything they come across.

Unfortunately, panic is a self-feeding creature - the more consumers panic, the more they hoard commodities; and the more they hoard, the more panic they create.

So essentially, this phenomenon often results in a vicious cycle.

While we concede that Zimbabwe is still facing economic hardships, it is also important to acknowledge that some situations are artificially created.

No one, including Government and the Reserve Bank of Zimbabwe, wants to relive the trauma that visited the country in 2008.

However, despite investing a lot of energy and effort to ensure that such crisis does not recur, there are still elements within the business community that seem to be working extraordinarily hard to ensure that they will materially benefit from the chaos that they are creating in the market.

Trust is however, an important commodity that the Government needs to restore.

Most often, reassurances from Gov- ernment are dismissed as sometimes they do not come to pass.

It is presently difficult for someone to reconcile why it is difficult for the generality of the population to access cash from the banks, while some individuals seem to have bucket loads of the same on the black market.

This obviously creates disaffection for the banks, RBZ and Government.

The abuse of the notes has become an issue of grave concern.

The introduction of bond notes, it seems, has not helped cash shortages, but instead has driven out hard currencies from the market.

It now seems that the surrogate currency is being used for arbitrage.

But what will happen if the RBZ were to recall all the bond notes in the market and revert to the original multi-currency system?

Ordinarily, bond notes are supposed to trade at par with the US dollar since they were tied to a facility from the African Export and Import Bank (Afreximbank).

While this might be true on the formal market, the situation is totally different on the black market.

It is difficult for importers to readily convert bond notes into hard currency without going through the foreign currency allocation system that is managed by the RBZ, so they conveniently resort to the black market where the forces of demand and supply re-rates currency.

The more foreign currency shortages persist in the economy, the more the black market is likely to thrive.

There is need to interrogate whether cash shortages have become better or worse under the new surrogate currency.

The bottom line is Government needs to efficiently rein in the runaway indiscipline on the market, and it also needs to do this in a smart way.

It therefore becomes important for Government, business and civil society to caucus on the way forward.

But it must also be appreciated that bad apples in any economy are unavoidable, it is only now that they are finding their voice.

They need to be silenced through restoring trust and meaningfully fulfilling promises that are made to the people.

Both the RBZ and the Ministry of Finance need to move in quickly to address what is happening on the market.

These two key offices must do everything in their power to protect hardworking citizens.

Currently the public is exposed to price increases and fear of the unknown.

Critically, in order to fight off the current trend in panic buying, there is need for the public to know that indeed even if they hoard the commodities, they will not disappear from shopshelves.

What seems to be of concern is the lethargy by the RBZ and Ministry of Finance to reassure the public.

A gradual shift towards speculative behaviour is the major challenge facing the economy today.

Speculation is conventionally defined as an attempt to profit from changes in the market price. It is different from investing.

Some experts actually compare it with gambling.

Market discipline needs to be restored and maintained.

The transacting public needs to be assured that the payment platforms are always secure and prices are stable.

One should be able to use all the platforms that are available on the market swiping, mobile money and cash - with considerable ease.

So, the challenge that Government currently faces is real, and they need to step up to solve them.