Let market forces determine bond notes value

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HARARE – The Reserve Bank of Zimbabwe Amendment Bill or Bond Notes Bill has now been passed and gazetted as an Act of 2017.


The central bank has warned that those fuelling the three-tier pricing that has emerged as market forces are overpowering the forced parity of the surrogate currency face imprisonment of up to seven years.


President Robert Mugabe, in October last year, invoked the Presidential Powers (Temporary Measures) Act to amend the Reserve Bank of Zimbabwe Act to designate bond notes as legal tender.


Parliament passed the RBZ Amendment Bill (H.B. 12, 2016) this month, which was gazetted unusually quickly. Speaker of the National Assembly Jacob Mudenda gave notice in the Government Gazette announcing that the draft bill had been transmitted to Mugabe for his assent and signature on March 7. The changes have now been given presidential assent.


Now, RBZ deputy governor Kupukile Mlambo has warned they were now moving to deal with retailers fuelling the three-tier pricing system for bond notes, swiping and US dollar.


The RBZ has finally acceded that the value of bond notes had tumbled. Some importers have increased prices to compensate for the bond notes which has seen an informal forex market discounting its value.


This comes as Zimbabwe’s inflation has moved into positive territory for the first time in two years as a result of depreciating value in bond notes. Consumers were absorbing the increase in prices of goods and services as the surrogate currency has lost 30 percent in value, despite attempts to rubbish the apparent fall in value by monetary and fiscal authorities.


According to the Zimbabwean Statistical Office, the country recorded inflation of 0.06 percent year-on-year (y-o-y) in February, compared to deflation of 0.65 percent y-o-y in January.


The data underlines the malaise in the stuttering economy and just how difficult it will be for policymakers to steer the economy out of the biggest downturn in decades.


Zimbabweans are outrightly refusing to accept the bond notes as equivalent to US dollars. This comes as US dollars have almost vanished from the open market as banks refuse to dispense the currency to clients.


The RBZ has stated that no more bond notes will be released soon, in a bid to avoid inflationary pressures through printing money. However, even if the central bank stayed true to this announcement, bond notes will gradually depreciate in value against the US dollar, which will add upward pressure on inflation.


It started circulating a $5 bond note last month, after first issuing the $2 note and $1 coin last November. The apex bank must let market forces determine the true value of bond notes, not impose it through force of diktat.

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