Opinion: Zimbabwe bond-notes add debt to the Republic of Zimbabwe; also worry about the possible inflation rate!

zim-bond-coins-2014

There been demonstrations in August 2016 on the current case of making bond notes in Zimbabwe as the economy and inflation rates can become hazardous for the economy. An economy and the policy that is not sustainable in any sense. Something that hasn’t been since the hyper-inflation of the 2008; as the current situation with other currencies than their own to keep the businesses and government a float; as well as fiscal policies to keep the Zanu-PF elite from still eating while the drought, El-Nino and Mugabe’s megalomaniac power-struggle to keep himself on the Iron Throne in Harare.

The reality is that the Bond Notes are excess for keeping up the ZANU-PF and the long-term President Mugabe. His Excellency Robert Mugabe have kept total control of the state and the Ministers collecting the riches while the basic infrastructure, institutions and all the other parts of state are eating of the taxes, donations and little foreign exchange that comes after the international sanctions of the Zanu-PF reign.

Here is the recent excuses and the reality that might happen with the next move for Bond Notes in Zimbabwe; as the more debt for giving debt notes to citizens instead of giving them a currency that actually has value. Not just empty paper notes that doesn’t have value for the citizen or the businesses. Take a look!

Patrick Chinamasa

Early July the Finance Minister Patrick Chinamasa:  

“Zimbabwe will introduce what the central bank calls bond notes in October to counter a shortage of cash in the country. Exporters will be paid with the notes, credited to accounts at the central bank held on behalf of the companies, along with a 5 percent bonus that the minister, Patrick Chinamasa, said the government is happy to pay to encourage outbound trade” (…) “Unless there are exports, there would be no circulation in the market of any notes,” Chinamasa said in a July 17 interview in the Rwandan capital, Kigali. “No exports — no issuance of bond notes.” The notes, to be produced in Germany, will be printed “relative to the volume of imports,” he said” (Njini, 2016).

More reports early on the Bond Notes:

“THE Reserve Bank of Zimbabwe (RBZ) in is talks with the African Export-Import Bank (Afreximbank) and German printers, Giesecke & Devrient, to finalise an agreement on the printing of bond notes, a central bank governor has revealed” (…) “Mlambo said the central bank would not print bond notes beyond the agreed threshold of US$200 million. He said: “We are finalising a tripartite agreement right now that we don’t print beyond the agreed US$200 million. The International Monetary Fund (IMF) has an eye on this. On economic grounds, it will not be prudent to go beyond that amount.” (Financial Gazette, 2016).

“Hon. Majome asked the Minister of Finance and Economic Development to state:

  1. The date when the US$20m Africa Import Export Bank loan to back up the bond notes was concluded and whether its terms were published by the Ministry in the Government Gazette within the 60 days as required by section 300(3) of the constitution; and
  2. Whether the loan agreement has been referred to Parliament for approval in terms of Section 327(3) of the Constitution and also referred to the relevant Portfolio Committee in terms of the Standing Rules and Orders, if not, to state reasons.”

John Mangudya

On 27th July 2016:

Hon Chinamasa says: “Firstly, I want to clarify as I have already done before that the US$20m Africa Import Export Bank facility is not a loan. It is a facility that works as guarantee. Naturally, Government and the Reserve Bank of Zimbabwe will ensure that whatever is done is compliant with the law”.

About Zimbabwe’s inflation:

“According to a note sent to clients in July from Exotix Partners’ Head of Equity Research Kato Mukuru, that dollarization of the Zimbabwe economy created two problems.

  1. There has been too much reliance on the US dollar. The government moved away from the multi-currency regime and said it would conduct all of its transactions dollars. And since most of Zimbabwe’s trade is with South Africa, the strong dollar (compared to the rand) has made it more difficult for Zimbabwe to compete.
  2. Zimbabwe has been running a current account deficit since 2009. Zimbabwe has been exporting more dollars than its been importing, causing a shortage of dollars in the system” (Garber, 2016).

Liquidity problems could cause the government to de-dollarize the economy sooner than expected, warns BMI Research, and that would send the country back into a cycle of rapid inflation. From BMI’s note” (…) “Adoption of a local currency would inevitably result in a rapid increase in the supply of broad money, as the central bank looked to inject enough liquidity into the economy to alleviate the ongoing cash shortage, caused by the current reliance on the US dollar. Without a simultaneous increase in real production, this would increase inflationary pressures.” (…) “As for how high inflation would get, BMI believes that would “depend on the rate at which the RBZ printed the new currency,” but could easily surpass 30%” (Garber, 2016).

This is deep enough as the economic situation is not promising and with the current leadership under President Mugabe the rule of law and stability of the fiscal economic situation that Zimbabwe is already in. Together with the unstable levels of demonstrations that are righteous as the regime haven’t cared for the citizens in decades. The zombies and vampires in the Parliament have cared for their paychecks and not for the well-being of the average citizens. That is why they start with a new round of Bond Notes from the Reserve Bank of Zimbabwe. Peace.

Reference:

Njini, Felix – ‘Zimbabwe ‘Bond-Note’ Printing Linked to Exports, Minister Says’ (21.07.2016) link: http://www.bloomberg.com/news/articles/2016-07-21/zimbabwe-bond-note-printing-linked-to-exports-minister-says

Financial Gazette – ‘Zimbabwe in talks with Afreximbank, German  printers over bond notes’ (21.07.2016) link: http://www.financialgazette.co.zw/zimbabwe-in-talks-with-afreximbank-german-printers-over-bond-notes/

Garber, Jonathan – ‘Zimbabwe’s next move could trigger the return of ‘rapid inflation’ (10.08.2016) link: http://www.businessinsider.com/zimbabwe-could-trigger-inflation-by-moving-away-from-dollar-2016-8?r=US&IR=T&IR=T

Mugabe denounces protest pastor Mawarire (Youtube-Clip)

“Zimbabwean President Robert Mugabe denounces the popular pastor Evan Mawarire who this month led anti-government protests” (AFP, 2016)

Sanctions crippled our capacity to own our international obligations, Zimbabwe’s finance minister (Youtube-Clip)

Zimbabwe’s finance minister Patrick Chinamasa on Sunday blamed international sanctions for the financial meltdown that has forced the government to delay wages of soldiers and civil servants as President Robert Mugabe faces rare popular protests. Speaking at the African Union summit in Kigali, Rwanda , Chinamasa said that his country was stifled by the economic sanctions imposed in the early 2000s on his country by the West.This,in retaliation to the alleged violations of human rights by Harare…” (Africa News, 2016)