Bond notes not solution to Zim’s problems: RBZ

Senior consultant and economist Ashok Chakravati makes a presentation at the Bond Notes 100 days review organised by the Confederation of Zimbabwe Retailers at Rainbow Towers Hotel in the capital yesterday

THE Reserve Bank of Zimbabwe (RBZ) says bond notes were a temporary measure and the solution to the country’s problems lies in production.

Speaking at the review of the bond notes after 100 days in circulation, RBZ deputy governor Kupukile Mlambo said there was need to create a conducive working environment.

“Our solutions to our challenges are not going to be solved by bond notes, but the solutions are in the factories.

We need to be productive and we need to be competitive and so forth. We need to create a conducive environment for all of us to operate. We need to keep the confidence with the bond notes in existence by not printing too much, that every bond note is backed by the $200 million [Africa Export and Import Bank loan] facility and if we don’t do that we will start having challenges,” he said.

“I think the bond notes are working in the areas we expected them to work, but they are not the final solution to the problems that we are facing. The companies in the factory need to produce, looking at policy-making with the Office of the President and Cabinet, which is currently working on the 100-day rapid results.”

Bond notes were introduced on November 28 under the export incentive scheme guaranteed by the Afreximbank.

He said the bond notes have provided liquidity in the economy, but foreign currency shortages were affecting the economy.

“The current challenge we are facing is shortage of foreign currency that is what we are facing right now,” Mlambo said.

“The problem came when we needed United States dollars for imports, but this problem is not new. There has always been shortages of foreign currency. These days, we barely see the $100 notes and the $50 notes because of externalisation.”

He said the bond notes would remain in circulation after the drawdown of the $200m facility.

“Our idea is that we will release them until we exhaust the $200m facility. To date, we have released $102m in $2 bond notes and the $5 bond notes,” the apex bank official said.

Commenting on inflation, Mlambo said business needs to see inflation to make profits.

Zimbabwe slipped out of deflation in February, when year-on-year inflation for the month was 0,06% — the first time inflation has gone above zero since September 2014.

Speaking at the same event, economist Ashok Chakravarti said the use of the dollar was an impediment to the growth of the economy.

“Bond notes is actually a side show. It is a genuine effort by RBZ to address the liquidity situation, but it is not a long term solution,” he said.

Chakravarti said bond notes were a local currency and required foreign currency to support the economy.

“It is not like the bond notes are the problem, the problem is something else. The bond note is not addressing the problem. It does not address the United States dollar challenges in the country,” Chakravarti said.

He, however, said adoption of the South African rand was not the solution, adding the best option was to have a local currency.

“Bond notes added liquidity, but it’s not a long-term solution. I advocated for the rand, but it is not a long-term solution. Let’s bring back the Zimbabwean dollar,” he said.

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Source: NewsDay

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