THE Reserve Bank of Zimbabwe (RBZ) has agreed to have one of the Confederation of Zimbabwe Industries (CZI) proposals pertaining to monetary policy inputs included in its latest policy re
RBZ governor, Gideon Gono, has agreed that non-resident Zimbabweans be given access to foreign currency bonds.
In December the CZI also recommended that the RBZ introduce a foreign currency auction system in the monetary policy statement.
Foreign currency bonds have two primary objectives – to allow non-resident locals to accumulate hard currency savings and to support their relatives back home.
The diaspora bond is issued only to non-resident Zimbabweans.
Under the scheme, interest is paid monthly in Zimbabwe dollars to nominated relatives of non-resident Zimbabweans at the ruling auction rate.
The principal is repaid in US dollars at 100% of face value.
Gono said with effect from August 1, the central bank would be issuing out foreign currency bonds to non-resident Zimbabweans.
He said the bonds would have a 12-month tenor and attract interest rate of 12 months “LIBOR plus a six percentage points per annum” which would be paid half-yearly.
The bonds will also be tradable and they will be fully guaranteed by the central bank for a full settlement of principal plus interest, in hard currency, on the date of maturity.
Gono said the lowest amount for participation for the bonds would be US$1 000, and it would be floated in “buckets of US$20 million per turn”.
The CZI had said in its proposals that the major advantage of the bonds would be to give the government access to foreign currency which “could be used to reduce international payments arrears”.
“There are many obstacles to a successful bond of this nature but this provides a genuine win-win opportunity and CZI feel that it merits further investigation,” the CZI said. “A logical next step would be to conduct market research on the concept amongst non-resident Zimbabweans.”