The Central Bank of Zimbabwe has started the circulation of $5 ‘bond note’ despite fears that it could worsen the crippling cash shortages in the country, a situation that has triggered panic buying and hoarding of basic food commodities, and long hours at banks.
Following the decision by the Reserve Bank of Zimbabwe (RBZ) last year to print local bond notes with the same value as the US dollar, the country has been using a mix of different foreign currencies since its own currency collapsed in 2009 during a period of hyperinflation.
Despite warnings that it could eventually lead to monetary inflation occurring at a very high rate, the RBZ in a statement said it has pumped, $15 million worth of new $5 bond note, as a way of restricting the externalization of foreign currency and easing liquidity pressures in the economy.
The new bond note is purple in color and carries images of balancing rocks and giraffes, as well as the same security features as the $2 bond note introduced November last year. The bond will be pegged 1:1 against the United States dollar and the circulation in the country could grow to $200 million worth eventually.
According to the Governor of RBZ, John Mangudya said that with the $15 million injection, a total of $88 million in bond notes is now in circulation, and it will help mitigate the problems of cash shortages in the country.
He however gave assurances that it won’t flood the market with the surrogate currency to avoid the effects of inflation.
“In order to solve the cash crisis in Zimbabwe while at the same stabilizing the economy, it was essential to go back to the basics. The reserve bank has established a $200 million facility which is supported by the African Export and Import Bank to provide a cushion for high demand for foreign exchange in this economy,” the central bank governor said.
He also encouraged citizens to not rely entirely on cash but to embrace electronic payment alternatives as a way of arresting the country’s “cash-first” culture.
Cash withdrawals has also been pegged to as little as $50 from $1000 for foreign travelers by some banks in the country, to block the leakages of foreign currency from Zimbabwe, as indigenous retail importers fret over delays in transferring funds that is used primarily for international transactions for cross border suppliers, which, they fear, will seriously affect their ability to buy and supply the local market with critical goods and services, and could lead to commodity shortages.