By Tendai Kamhungira
Former Industry and International Trade minister Nkosana Moyo has slammed bond notes, arguing the surrogate currency is “not the answer” to the country’s deepening cash crisis.
The bond notes — valued at par with the United States dollar — were introduced in November last year by the Reserve Bank of Zimbabwe (RBZ) in a desperate attempt to ease the liquidity crisis, but since their advent, the greenbacks have disappeared from the market, worsening the situation.
“The answer is not bond notes,” Moyo said in an interview with Capital26free, a podcast network station.
The respected economist — famed for publicly speaking out against attacks on businesses and factories by war veterans and later uncharacteristically resigning from President Robert Mugabe’s Cabinet about a year after his appointment — said “the answer is to stop the haemorrhage of where our money went and continues to go. Once we stop that, the issue of bond notes will not even arise”.
“ . . . somebody is responsible for our money disappearing from the banks and they need to give us an honest answer,” Moyo said.
“When we dollarised, we literally — all of us without exception — zeroed our savings to nothing. So every single dollar that is in my account, I earned from that day onwards . . . where did it go?” he queried.
The executive chairperson and founder of the Mandela Institute for Development Studies’ sentiments come at a time the country is experiencing crippling cash shortages.
US dollars have almost vanished from the open market as banks refuse to dispense the currency to clients, forcing consumers to increase the uptake of bond notes, which have also been disappearing from circulation.
“The starting point is you need to ask the banks, because the banks have not been honest with us, where did our money go? Because if I put my money in the bank and it’s not there, it must have gone somewhere. It’s either the bank lent that money recklessly and lost it; or they gave it to somebody else. They need to account for it and that’s our starting point,” Moyo said.
Bond notes are used solely for domestic commerce, as traders still require US dollars to import goods.
Zimbabwean traders have resorted to the black market, where they pay a 25 percent premium to get scarce US dollars.
This premium is ultimately absorbed by consumers through final goods and service price increases.
Retailers also place different price tags on goods depending on the currency used to pay.
However, low confidence in the banking system led to consumers rapidly withdrawing hard cash from banks. As a result, banks implemented a withdrawal limit on consumers and businesses.
So far, the central bank has injected $120 million worth of bond notes into circulation.
Last week, RBZ governor John Mangudya told State media that there is around $900 million cash in circulation.
“This, together with bond notes, is substantially in line with best practice where the ratio of cash in circulation to deposits is around 10-20 percent. We cannot call it a cash crisis, but a crisis of indiscipline, productivity and lack of business management.
“We are now invoking provisions of the Bank Use Promotion Act to ensure and encourage people like traders, wholesalers and other dealers to bank their money.
“There is need for a paradigm shift from a consumption type of economy to a productive one,” the RBZ chief said, adding authorities were importing $60 million per month and promoting “plastic money” as part of measures to make cash available.
Moyo, a former World Bank International Finance Corporation staffer, said the country’s economy continues on a downward spiral because of the prevailing situation, where factories are closing on a daily basis, leading to many people losing their jobs.
“The government is not facilitating (investment), the government has never taken the view it is responsible for growing the economy,” he said.
“The government has continued in a mind-set which says the economy is an enemy and all the legislation that they put in place, whether its labour legislation or whatever is meant to punish the economy, but everything else that a country does is a product of the economy,” he said.
Moyo also said politicians were living large, contrary to the economic situation on the ground. Daily News