Zimbabwe 'Zombie Currency' Hits Streets as Bond Notes Arrive


In past weeks, many Zimbabweans slept in queues outside banks to try to take out all their United States dollars fearing they would be turned into bond notes, but banks put severe limits on daily withdrawals.

At the Road Port bus station in the capital Harare, an informal foreign currency market, traders said the $2 bond notes were trading, as planned by the central bank, at 1:1 with the dollar.

The RBZ says bond notes are being introduced as an export incentive under the $200 million facility guaranteed by the African Export-Import Bank but they are largely viewed as a desperate measure to address long-running liquidity challenges. So they would require either US dollars or South African dollars, or other internationally tradable currencies to be able to do business. The introduction of the bond notes represents the latest twist in the country's dire economic affairs, which have existed for almost two decades.

Branches are advised that RBZ has introduced new bond notes and coins to be used with effect from Monday 28th November 2016. "We will continue agitating and protesting against them".

The biggest constituency which could make or break the bond notes is the transport sector.

The Reserve Bank of Zimbabwe has imposed a $50 daily restriction per customer.

Even if they do not depreciate in value, many economists say the bond notes will serve only as a sticking plaster for an economy with a $250 million-per-month trade deficit.

President Robert Mugabe's government scrapped the Zimbabwe dollar after it was ravaged by inflation that peaked at 500 billion per cent.

The notes are in $2 and $5 denominations and will be pegged at 1:1 against the dollar.

Although Zimbabwe officially accepts a basket of foreign currencies - including the South African rand, the British pound and the euro - US dollars have become the dominant tender by far.

It said individual withdrawal of the notes will be limited to a maximum of 50 dollars per day and 150 dollars per week to curb abuse.

Analysts and critics of the bond notes believe the currency could buckle under pressure from demand for increasingly short USA dollars in Zimbabwe's import-dominated economy. "It is back to the Zimbabwe dollar scenario".

Mangudya said no new accounts would be opened for the surrogate currency, as transactions would be made using existing USA dollar accounts.

Zimbabwe has released a new currency in a bid to ease crippling cash shortages throughout the country.

Many are anxious the bond notes will usher in further economic turmoil, triggered by a return to hyperinflation, which previously pushed the economy to the brink of collapse. A survey in Masvingo revealed that those who were withdrawing small amounts of money were being given the bond notes while those who were withdrawing larger amounts were being issued their money in part bond notes and USA dollar.