The chaos rocking the banking sector following the ill-advised introduction of bond notes by the Reserve Bank of Zimbabwe (RBZ) last week exposed government’s devious approach to currency reforms.
Comment: The Standard Editor
John Mangudya, the central bank governor, went against good advice from economists and ordinary citizens weary of currency failures in Zimbabwe and announced the introduction of $10 million worth of $2 bond notes and $2 million in $1 bond coins on November 26.
Mangudya also announced a cap on withdrawal limits at $150 a week per depositor and the usual praise-singers were quick to describe the move as a master stroke that would end the year-long cash shortages.
However, the saying that bad money drives out good money found relevance in Zimbabwe in less than a day after banks started issuing out the new notes, as some banks that had appeared to weather the liquidity crunch suddenly ran out of the United States dollar.
Once again, meandering queues became the order of the day as cash shortages reached frightening levels.
According to RBZ deputy governor Khuphukile Mlambo, financial institutions also ran out of the bond notes before the week was even over.
The surrogate currency has already failed the basic test of stabilising the liquidity situation in the country as queues became longer at banks after its introduction.
Several banks deactivated their automated teller machines as they tried to adjust to the new dispensation amid revelations that the central bank ambushed financial institutions, informing them of the introduction of the bond notes only a day before they hit the market.
Panicking traders, who were not well-acquainted with the bond notes’ security features, rejected the new currency, while fuel dealers were reluctant to accept them.
As the banks ran out of both the United States dollars and bond notes, the financial institutions started to ration cash. The RBZ appeared to be a spectator as the chaos intensified.
Zimbabweans became fearful of the return of the historic hyperinflation era that was a direct result of bad government policies that included printing money for quasi-fiscal activities.
The fears were justified because the government has not been very transparent in the run-up to the introduction of the bond notes.
Zimbabweans are still in the dark about where the surrogate currency is being printed and by who. This betrays a government that is not up to any good.
The term sheets of the so-called Afrexim Bank $200 million loan still remain a mystery yet the Constitution compels the government to make public any instruments that entail contraction of public debt.
Vice-President Emmerson Mnangagwa arrogantly ducked questions in Parliament last week when he was asked about where the money is being printed and evidence of the Afrexim bank loan agreement.
To make matters worse, the surrogate currency was introduced before the parliamentary process on the Reserve Bank of Zimbabwe Amendment Bill, which would make the bond notes and coins legal tender, had been concluded.
The bond notes were forced on people through the contested presidential powers and some RBZ laws and the strategy has started to backfire.
Almost a week after the introduction of the currency, the real exporters are also yet to lay their hands on the bond notes — an indication that RBZ claims that they are an export incentive are just a ruse.