Zimbabwe’s new finance minister considering scrapping bond notes, what you need to know…

HARARE (Reuters) – Zimbabwe’s new Finance Minister Mthuli Ncube may scrap the quasi currency bond note and liberalise 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 U.S. 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 U.S. 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 U.S. 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 macro-economic 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 programme.

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

Reporting by MacDonald Dzirutwe; Editing by Kirsten Donovan

Partner Content

An Innovative Approach is what will save us

Charmaine Mabuza, Group CEO of ITHUBA Holdings Every functional business has business continuity plans...

Standard Chartered and Airtel Africa form a partnership to drive financial inclusion across Africa

Dubai, United Arab Emirates / London, United Kingdom – 13 August 2020: Standard Chartered Bank and Airtel Africa have today announced a...

THE FUTURE JUST ARRIVED: THE ROLE OF BANKS IN A POST-COVID WORLD

THE COVID-19 GLOBAL pandemic has brought forward the future. It has brought about humanity’s biggest challenge in a century, to choose between...

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

- Advertisement -