Zimbabwe’s new finance minister ‘mulls scrapping bond notes’

The southern African nation introduced bond notes in November 2016 in a bid to ease acute shortages of cash.

FILE: A man holds a bond note released by the Reserve Bank Of Zimbabwe in Harare central business centre. Picture: AFP.

HARARE - Zimbabwe’s new Finance Minister Mthuli Ncube may scrap the quasi-currency bond note and liberalize exchange controls as part of reforms he plans to implement by end of this year, a state-owned weekly newspaper reported on Sunday.

The southern African nation, which dumped its currency in favour of the US dollar in 2009 following years of hyperinflation, introduced bond notes in November 2016 in a bid to ease acute shortages of cash. The shortages have, however, worsened while a black market continues to thrive.

The notes are backed by US dollars loaned to the government by the African Export and Import Bank and can be used like cash.

Officially, they are pegged to the dollar at a rate of 1:1, but on the street, $1 fetches up to 1.50 in bond notes.

“I am very clear that there have to be currency reforms and the current currency approach is not working,” Ncube told the government-owned Sunday Mail.

He said he would explore three options: either Zimbabwe joins the South African rand union; uses only the US dollar while removing bond notes from circulation or reintroduces the Zimbabwean dollar.

Ncube, however, said a local currency would only be introduced when the country has enough foreign reserves and achieves macroeconomic stability. Zimbabwe currently has two weeks import cover, according to central bank data.

Ncube, a former senior executive with the African Development Bank, was appointed by President Emmerson Mnangagwa on Friday and is expected to lead Zimbabwe’s economic recovery program.

He was not immediately available to comment when Reuters tried to contact him.

A dwindling supply of cash dollars has led to banks limiting daily withdrawals to as little as $30 in bond notes. Companies are struggling to pay for imports and foreign investors cannot repatriate dividends or profits.

There is $350 million worth of bond notes in circulation, according to latest central bank figures.