Since 2009 when Zimbabwe abandoned its currency due to hyperinflation, the country has had to deal with the tough economic crisis, the latest being that of banks lacking adequate cash and have been forced to close down some ATMs to limit withdrawals.
The result of the closure is not only being felt by ordinary citizens but also, businesses and companies risk closure as the country’s ailing economy cause the dollar to disappear out of the market.
On Wednesday (May 4, 2016) John Mangudya, governor of the Reserve Bank of Zimbabwe said in a statement that the bank will print “bond notes” of $2, $5, $10, and $20, which will have the same value as their US dollar counterparts.
In the past eight years, Zimbabwe has juggled between a range of foreign currencies including the US dollar, the South African rand, the British sterling, and most recently, the Chinese yuan. But the strengthening dollar is working against a country that is struggling to remain afloat.
With Zimbabwe importing almost everything and exporting less, the struggle in the country indicates that President Robert Mugabe’s government is facing the worst time while it tries to resuscitate an economy that’s reduced by half in the last 15 years, according to government estimates. With about 90 percent of the population out of formal employment, the situation in Zimbabwe is dire.
For the first quarter of the year, the imports averaged at $490 million, while exports stood at $167 million.
In the statement, Mr Mangudya said that the Zimbabwean case has been worsened by the “dysfunctional multi-currency system as a result of the strong USD.” He added: “the USD has come to be more of a commodity, a safe haven currency or asset than a medium of exchange.”
On his part, Sam Malaba, the chief executive officer of Agriculture Bank of Zimbabwe said the problem was related to the country’s balance of payment. “We are importing more than we’re exporting and we can’t print money because we use mainly the US dollar.”
The Reserve Bank of Zimbabwe also unveiled measures to be taken in order to salvage the economy. In the Wednesday statement, the bank said it will convert 40 percent of all new dollar foreign exchange receipts from the export of goods and services, including tobacco and gold sale proceeds into the South African currency and 10 percent of the income into the shared European currency at the official rate.
Additionally, daily withdrawals were limited to $1,000, 1,000 euros ($1,149) or 20,000 rand ($1,345).
The regulator also said the bond notes to be introduced over the next two months, will be backed by $200 million injections by the African Export Import Bank.
The poor economy has trickled down to workers who have either gone unpaid or are paid bit by bit as employers struggle to withdraw notes. A farmworker in central Zimbabwe said that they have suggested they be paid in food and goods until the situation is handled.
Recalling how Zimbabweans negatively reacted to introduced bond coins, of between 1 cent and 50 cents, pegged to the US dollar in 2014, to deal with the country’s lack of small change, some critics said few Zimbabweans might not take to the bond notes either.
Rejoice Ngwenya, an economist with the Coalition for Markets and Liberal Solution in Harare said: “Mangudya is once again trying to introduce the Zimbabwe currency through the back door.”
Rejoice Ngwenya, an economist with the Coalition for Markets, and Liberal Solution in Harare said: “Mangudya is once again trying to introduce the Zimbabwe currency through the back door.”
Image credit: AFP