The Zimbabwean government is set to import more foreign currency to ease a biting liquidity crunch as it awaits the introduction of bond notes in August
Government unilaterally opted to introduce the bond notes, a token currency equivalent to the US dollar, following severe cash shortages that manifested in April.
The worsening cash shortage has been blamed on externalisation by companies and individuals, an acute trade deficit favouring imports and wide circulation of money in the informal financial market.
The introduction of the bond notes was initially reported to have been scheduled for June, but the Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, said the process was just beginning and would take at least four months.
“The procurement of bond notes takes a while as it involves designing, origination and printing. The minimum time it takes to procure such security documents is between four and five months … In the meantime, we will import more cash,” Mangudya said.
The money would be imported through local banks. Mangudya told parliament early last month that banks had imported a total of $263 million between January and April this year.
The bond notes, which will reportedly be printed in Germany, are backed by a $200 million monetary injection sourced from an African Export-Import Bank facility and will be in $2, S$5, $10 and $20 denominations.
In 2014, government introduced bond coins to ease the problem of short change
Initially, service providers, manufacturers and consumers rejected the bond coins as they perceived them as an attempt to bring back the Zimbabwean dollar which was phased out in early 2009 following severe hyperinflation.
The local currency was replaced by a basket of foreign currencies that was dominated by the greenback, the South African Rand and the Botswana Pula. Following the acute depreciation of the rand, the US dollar became the main trading currency.
It now accounts for about 97 percent of all transactions.
Finance and Economic Development Minister, Patrick Chinamasa, also told State media, which quoted an unnamed official saying the International Monetary Fund (IMF) supported the bond notes. Mangudya said international financial institutions were “seized with that matter (of bond notes) as Zimbabwe is undergoing economic programmes with them”.
“The bond notes are for funding the export incentive scheme to support exporters. Enhancing exports is necessary to maintain and sustain the multi-currency system,” he added.
This was echoed by RBZ deputy governor, Kupukile Mlambo, who said: “Remember, we are also under a Staff Monitored Programme (SMP) of the IMF. So, they, too, also monitor these things to check if they are all transparent.”
The SMP is meant to instil financial and economic discipline by rationalising the civil service, ensuring public sector cost saving, improving public procurement, ridding the financial sector of problem banks and reducing non-performing loans.
Zimbabwe owes the IMF, World Bank (WB) and African Development Bank (AfDB) some $1.8 billion and is required to make substantial repayments before aid suspended by the first two more than a decade ago can be resumed.
Government is saddled with an external debt of around $7 billion and a domestic debt of more than $1.7 billion, according to international financial institutions. Mlambo acknowledged that Zimbabweans were worried by the introduction of bond notes after losing the local currency when the economy dollarized