Govt drafts law for bond notes committee
GOVERNMENT is in the process of drafting a Statutory Instrument ( SI) that will give legal effect to the committee that is supposed to superintend the administration of bond notes on the local market.
Initially, the Reserve Bank of Zimbabwe ( RBZ) was expected to hand-pick members of the committee before the introduction of the surrogate currency, but it was later advised that the body needed to have a legal underpinning in order to have legitimacy.
There were fears that without an independent body to monitor the administration of bond notes the central bank would have had carte blanche to arbitrarily inject more bond notes than initially promised.
The Presidential Powers (Temporary Measures) Act enabled the RBZ to issue the new currency on November 28, 2016.
Already, US$ 72 million worth of bond notes have since been released onto the market.
RBZ Governor Dr John Mangudya told The Sunday Mail Business that he was confident that the body would be established before the US$ 200 million bond note facility is exhausted.
“We wanted to establish the (independent) body along with the introduction of bond notes in November last year but after some discussions with the Finance and Economic Development Ministry, we agreed to craft a legal instrument to legitimise and strengthen the existence of that body.
“We are working flat out to establish the body in time to ensure that they can monitor the bond notes as they come out. We should not find ourselves in such a scenario where we exhaust all the bond notes ( US$ 200 million) without a body as it defeats the whole purpose of estab- lishing one.
“The body is expected to monitor the inflow of the bond notes in the market so as to make sure that they won’t flood the market so as to avoid fuelling inflation,” said Dr Mangudya.
In essence, the bond notes, which are being introduced as an export incentive, are meant to stimulate exports and ease the present cash shortages.
Despite scepticism about their value, bond notes are still trading at par with the US dollar.
Experts say the surrogate currency has managed to liquefy local transactions and make them simpler.
Withdrawal limits are now pegged at US$ 300 per week from US$ 150 in November. Finance and Budget Parliamentary Portfolio Committee chairperson Mr David Chapfika said the independent board on bond notes is consistent with the Banking Act.
“The Statutory Instrument on the independent body on bond note is done in line with the amended Bill of the Banking Act by the central bank and Finance Ministry, and as the portfolio committee on finance, we have done our part.
“All the nitty-gritties will be done by the aforementioned monetary authorities,” said Mr Chapfika.
Monetary authorities continue to advocate for the increased use of plastic money in order to ease pressure on the demand for physical cash.
The value of transactions processed through Point of Sale platforms rose 23 percent to US$ 550 million in December from US$ 446 million a month earlier.
Also, the number of POS terminals doubled to 32 540 in December from 16 300 in the same period a year ago.
The new US$ 5 bond note is expected to be issued before March.