Source: Gift Phiri, Daily News
There is renewed fear among both business people and ordinary Zimbabweans that the country’s economy may soon hit the disastrous lows of 2008 — as bond notes continue to lose their value against the United States dollar, with the coveted greenback now almost completely unavailable on the open market.
This comes as economists have also warned of a fresh round of sharp rises in the prices of basic goods, including foodstuffs — as the US dollar continues to vanish from the market, leading political analysts to forecast renewed civil unrest.
However, Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, is adamant that the value of bond notes is not tumbling — asserting to the Daily News on Sunday yesterday that the surrogate currency was still trading at par with the dollar.
He also dismissed strongly recent State media reports that the under-pressure central bank would soon introduce $10 and $20 bond notes to ease the country’s severe cash shortages — claims which fuelled suspicion that Mangudya was about to flood the market with the surrogate currency.
But long-suffering Zimbabweans who spoke to the Daily News on Sunday said bond notes were “definitely devaluing”, adding that many shops around the country were also beginning to reject them.
It was also established yesterday that some garages were giving preference to motorists buying their fuel in hard cash — particularly those paying in US dollars.
An informal foreign currency dealer who plies his trade around Africa Unity Square also said he was selling one American dollar in hard cash to the equivalent of $1,30 in bond notes, meaning that the surrogate currency had lost value to the tune of 30 percent.
Economic expert Prosper Chitambara said bond notes were losing their value while US dollars were disappearing from the market because importers needed greenbacks to replenish their stock — and given the scarcity of the dollar and the demand for it, a premium was now placed on the American currency, with an inevitable parallel market emerging.
“What is causing all this is that the bond note is not internationally tradeable. If you are a business that relies on imports, you can’t use bond notes to import, which has affected their value.
“Value in this case is determined by market forces of supply and demand,” Chitambara told the Daily News on Sunday.
Another economist, Witness Chinyama, said the economy was now dominated by bond notes, which the market perceived as “bad money”.
“The good money (dollars) has been driven out of circulation by the bad money, as bond notes can’t be used to import goods.
“While at official level the currencies are still at 1 to 1, for the importer, the bond note is weaker. The dollar is now the reserve currency,” Chinyama said.
But Mangudya vehemently denied that the value of bond notes had tumbled.
“Have you seen twin-pricing in OK (supermarket) or other major outlets? We can’t talk of backdoor shops … Go to the formal market, there is no weakening of value there … we can’t talk of out-layers,” he said.
Asked about some supermarkets which are charging three to five percent more for goods bought using debit cards, Mangudya said: “Thank you for the information. We will use it to assist the market. It’s important what you are telling me. It’s good information”.
Former Finance minister, Tendai Biti, was among those who also said multiple exchange rates were now in existence in the market, adding that the government was effectively running “a Ponzi scheme” — a form of fraud.
“You have four sources of the Ponzi scheme. First is dollar bank balances sitting in the bank, with depositors unable to get their money. Depositors have been transacting through RTGS (real-time gross settlement) and debit cards.
“Wherever you use debit cards, it’s just transactional. We are circulating hot money, and it’s huge. We need an audit of how much money has been created through the circulation of hot money,” Biti told the Daily News On Sunday.
“The second challenge is money being deposited into exporters’ accounts. The RBZ is crediting accounts with RTGS balances. The real money is not coming out. That money is being recycled and rechannelled.
“Government has been borrowing, issuing treasury bills and using them as a source of currency. Take the RBZ debt of $1,5bn — all of it was paid by treasury bills.
“We now have billions worth of treasury bills, some of which will be redeemed as late as 2028. Meanwhile, importers have queues ranging between one month and six months. And applications for import permits are not being processed.
“We need a change in government to restore trust. We need to start producing … factories, mines have to start working. We need a whole raft of reforms which Zanu PF is not capable of,” Biti added.
Many economists and businesses have been pushing for the adoption of the South African rand to avoid the country plunging into an economic crisis.
President Robert Mugabe also backed Zimbabwe’s greater use of the South African when he spoke in an interview with the ZBC to mark his 93rd birthday a fortnight ago.
The nonagenarian has also since said that bonds notes are a temporary measure to mitigate cash shortages in the country.
“Bond notes are just a temporary thing. We want you to bear with us. We want you to bear with us. We wanted to adopt them for a short period,” he said.
Meanwhile, opposition leader Morgan Tsvangirai’s MDC says bond notes were “always going to be a disaster”.
“Bond notes were always bound to flop. It’s just a matter of time before the bond notes experiment blow up in our faces. We don’t see these bond notes holding sway until July this year,” MDC spokesman Obert Gutu said.
“The economy is in free-fall and our export earnings continue to decline at an alarming rate. Essentially, bond notes are nothing more than useless pieces of very cheap paper,” he added.
Cape Town-based think tank, NKC, has also said that the shortage of US dollars on the market were fuelling price spikes.
“Upward price pressures could potentially be driven by the rise in the cost of goods and services (mainly bread, cereal, seafood and oils) as a result of US dollar shortages,” it said.
Source: Gift Phiri, Daily News