Sunday, November 06, 2016

Mangudya Warns Zimbabwe Politicians on Bond Notes
Zimbabwe Sunday Mail Reporters

No amount of political pressure will force the Reserve Bank of Zimbabwe into printing bond notes above the US$200 million threshold it has set, RBZ chief Dr John Mangudya has said.Some sceptics fear that some politicians could try to arm twist the central bank to print more notes, resulting in inflationary turmoil. Dr Mangudya, however, allayed those such fears, saying money was not printed for political expediency.

President Mugabe has gazetted a Statutory Instrument providing a legal framework for introduction of bond notes as legal tender. Statutory Instrument 133 of 2016, Presidential Powers (Temporary Measures) Amendment of the Reserve Bank of Zimbabwe Act, confers the central bank with authority to issue bond notes using its preferred design, form and material.

At a recent awareness event in Harare, Dr Mangudya said, “People don’t know how money is printed; I know there is a lack of trust and fear among ourselves. Money is not printed because the President says Mangudya come and print money.

“That one (likelihood of printing more money) hurts me and it is not right. It is not true. I think that is an insult to the Office of the President and Cabinet and … ministers because that is not the way money is printed; that is not the way a reserve bank operates.”

Dr Mangudya went on: “It’s not a party issue, the Reserve Bank is an apolitical institution and I prefer to continue like that. And there is no one who tells me to print more money, kuti zviite sei? You know what; I think that is a lack of respect.

“Let me tell you the downside of it; there is no way the Government will ask us to print more because they know it will cause inflation. And that will push the Government out of power because there will be too much money (in circulation): common sense. There is no one who will do that, it’s is only a perception.”

Zimbabwe is battling United States dollar cash shortages, with most depositors queuing for hours only to withdraw between US$50 and US$100 from banks. The situation has been attributed to externalisation, a huge trade deficit, lack of a savings culture and increasing pressure on the US dollar from within and outside Zimbabwe.

Authorities are introducing bond notes as both an export incentive and to ease pressure on US dollar transactions. Exporters will be paid between 2,5 and five percent of export value in bond notes as an incentive to up capacity. In an interview last week, Dr Mangudya said the US$200 million the country received from the African Export-Import Bank will not be injected into the economy directly owing to high levels of foreign exchange malpractices that include externalisation, capital flight, cash hoarding and corruption.

“Bringing in bond notes would mitigate against such malpractices and other vices that have become entrenched in the economy. Bond notes would, therefore, preserve the value of the facility. “The delay (in releasing the notes) has been necessitated by the need to ensure that the public is made aware of the bond notes’ features before they come into circulation.

“There are other logistics related to the distribution of the Bond notes to banks according to exports realised, as well as the banks’ distributions of the same to different parts of the country.” He said the lifespan of bond notes was dependent on how long the US$200 million facility would last.

“In this respect, exporters are encouraged to step up their businesses and benefit from the scheme before it is exhausted. Each bond note … would be evidence of exports within the economy and would represent a small portion of up to five percent of the foreign exchange earned by the country.”

He said bond notes were not a surrogate Zimbabwean dollar, but a separate financial instrument issued at par with the US Dollar.

“Bond notes will operate in the same manner the bond coins have been operating. Bond notes will exchange at the same value as the US dollar. “When the central bank introduced bond coins for the purpose of change in 2014, many were sceptical that they would not maintain their value, but they have.”

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