Zimbabwe’s apex bank has announced its introduction of new “Bond notes” to ease cash shortages gripping the country and the issue of economic stability caused by massive adoption of the United States dollar, which business leaders and other officials say is making the country lose out of competitive markets.
This was revealed by the Reserve Bank’ Governor Dr John Mangudya in a media briefing. The governor said the new measures which include the conversion of foreign exchange receipts into rands and euros will spread the use of other currencies.
The new notes which will be called “Bond notes” is expected to circulate the country this week in denominations of 2, 5, 10 and 20 as they’ll be used alongside the US currency which has been in circulation in Zimbabwe since 2009.
Zimbabwe adopted a multiple currency regime in 2009 after its own currency crippled following hyper-inflation. However, according to the central bank, there has been stronger usage of the US Dollar while other currencies such as the euro and the rand have been side-lined.
The country has in the recent weeks, been faced with large shortage of the notes with some ATMs running out of cash or dispensing only small quantities and banks imposing withdrawal limits.
Only about six banks were importing the United States Dollars, living the banking sector cash strapped and unable to meet demand from depositors.
But in his speech to the media on Wednesday, Mangudya said the central bank would introducing a new policy measures aimed at addressing the cash shortages. He said the policy measures include imposing withdrawal limits, converting corporate export receipts, allocating funds to importers in priority sequence and introducing “bond notes” equivalent to U.S. dollars in value.
Starting Thursday, individuals will also be restricted in taking cash out of the country, with a maximum limit of 1,000 U.S. dollars or 1,000 euros in cash. The daily cash withdrawal limit from banks is also set at 1,000 U.S. dollars
“In order to restore and promote the widespread usage of currencies, with effect from May 5 2016, 40% of all new US Dollar foreign exchange receipts from export of goods and services shall be converted by the Reserve Bank at the official exchange rate to Rands and 10% into euros.
“This policy measure is designed to ensure that we spread the demand for cash amongst a wide range of currencies in order to mitigate against concentration risk,” Mangudya said.
“These measures according to him, will go a long way in increasing economic confidence within the economy.
A foreign exchange priority list to guide banks in the distribution of foreign currency had been crafted, favoring net exporters who import raw materials and machinery,non-exporting importers of raw materials and machinery for value addition and import substitution, strategic imports such as basic foodstuffs, fuel, medicines, and payments for services not available in Zimbabwe.
Meanwhile, most Zimbabweans fear that this new decision by the central bank is a sneaky attempt to take Zimbabwe back to its own currency. The fear increased when the new notes is reported to have the backings by a $200 million facility from the African Export-Import Bank (AFREXIMBANK).
Prior to the introduction of the bond notes, authorities said the use of the U.S. dollar had increased from 49 percent in 2009 to the current 95 percent.