Zimbabwe to boost bond notes, as cash woes mount – report

As Zimbabwe’s cash crisis worsens, top banking officials say there are plans to boost a bond note facility, reports said on Sunday.

Bond notes were introduced in November backed by a $200 million loan from the African Export-Import Bank (Afreximbank). The small denomination notes and coins have no value outside Zimbabwe.

Negotiations underway

Afreximbank’s president, Benedict Oramah, told the private Standard newspaper at a meeting in Rwanda this week that negotiations are under way to review the facility.

“I think the issue of the incentive being increased is under discussion,” he told the paper at the bank’s AGM in Kigali.

“There are people who are working on it,” he said, adding that he was sure “whatever is being requested is within country limits.”

Hyper-inflation fears

Zimbabwe’s central bank has vowed not to release more than 200 million US dollars’ worth bond notes, fearful of fuelling the kind of hyper-inflation that forced Zimbabwe to ditch its currency in 2009.

Central bank chief John Mangudya told the Standard at the same meeting that his bank had so far released $160 million worth of bond notes.

“Once the facility that has been given to us has been exhausted we need to find ways and means of ensuring that we negotiate for more so that at the end of the day we do not destroy the export generation scheme or plan,” he said.

”A gold standard’

The notes are paid out as an incentive to exporters like tobacco farmers and gold miners, and to Zimbabweans who are sent hard currency from relatives abroad.

“As long as the facilities are there to bank bond notes it’s more like a gold standard, you issue an instrument that is backed by something so that it becomes convertible. We can’t just issue something out of a thumb suck,” Mangudya added.

The bond notes have done little to ease cash shortages. Massive queues are visible outside most banks each month-end as depositors struggle to withdraw cash.

The situation is forcing more and more Zimbabweans to turn to plastic money and electronic transactions.