Zimbabwe ‘zombie currency’ hits streets as bond notes arrive

Zimbabwe’s central bank has started adding bond notes — printed by the government and backed by dollars — into the financial system, delivering the currency over the weekend to banks in the southern African country.

With no currency of its own, Zimbabwe allows the use of a basket of foreign exchange including the South African rand, the euro and the pound. The bond notes are intended to reduce a shortage of hard currency that has led to delays of several months in  salary payments to civil servants, the military and some private company employees.

Zimbabweans have taken to the streets in protest against the new currency, fearing a return to hyper-inflation that peaked at the end of 2008, when the International Monetary Fund said inflation reached 500 billion percent. The country abandoned the Zimbabwe dollar in February 2009 and became the world’s first open multi-currency economy.

“People are calling it zombie money, because it’s risen from the death of the Zimbabwe dollar and will be about as useful,” Freddie Sango, a taxi driver in the capital, Harare, said by telephone Monday. “We’ll use it to pay fines and bribes to the police.”

Harare residents complained later Monday that some retail outlets and filling stations weren’t accepting the bond notes as currency and that mobile phone airtime providers were asking customers paying with bond notes a higher price.

‘Not Real’

“Some shops in the city center are refusing them completely, saying they’re not real money, while some airtime vendors are asking for three bond notes to the U.S.,” Tendai Tamuka, a taxi driver in the city, said in a telephone interview.

The central bank has limited withdrawals of bond notes to $50 a day, up to a maximum of $150 a week, and commercial banks are continuing to cap the amount of cash provided to customers.

“We’re giving our clients their usual $60 daily withdrawal limit and on top of that, if the client still wants more cash, we’re giving out $50 worth of bond notes a day,” Never Nyemudzo, chief executive officer of CBZ Holdings Bank Ltd., said in a telephone interview from Harare Monday.

-Bloomberg