admin
FOR bond notes to be acceptable there are two basic conditions: shops and businesses have to accept them without question or restriction and everyone wants continuous assurance that the amount pushed into circulation remains within the limits already announced by the Reserve Bank of Zimbabwe and remains fully backed by US dollars.
The Reserve Bank of Zimbabwe Act already allowed the RBZ to issue bond coins and bond notes, but an addition was needed to ensure that these notes and coins were legal tender and that businesses and those owed money had no choice, but to accept them.
This addition came on Monday with the President using his powers to issue Statutory Instrument 133 which temporarily amends the RBZ Act to make the bond notes, and the previously issued coins, legal tender.
Parliament will soon have to debate this temporary amendment and make it, or something very similar, part of the permanent law. But since the final version of the permanent amendment will come after bond notes are in circulation we have no doubt that Parliament will pass something similar, perhaps nuanced by the initial issue and use.
As we have noted several times, bond notes conceptually are “paper plastic” very similar to ZimSwitch cards. That is they are a way of transferring US dollars from one bank account to another, with the flexibility not seen in ZimSwitch of making that journey through dozens of hands if necessary.
But they only have a real value when banked and credited in a US dollar bank account. Neither ZimSwitch cards nor bond notes can be used outside Zimbabwe and this is desired by the monetary authorities who do need to control external capital movements and payments if Zimbabwe is not to become a total pauper unable to import even essentials.
So when the Government was looking at the necessary legal framework, it could simply look at the ZimSwitch and mobile money systems already in use. Here, while almost all businesses are more than happy to accept “plastic”, there have been a minority wanting to play the fool, especially in recent days when the diminishing quantity of US banknotes inside Zimbabwe has created a market for selling these at a premium. So the Government has removed the option of rejection by a business.
We cannot see how any business can complain.
They are all supposed to bank cash takings regularly and banking bond notes will build their US dollar bank accounts. No one is taking anything away except the ability to break the law.
To make this necessary piece of legislation effective the RBZ needs to have a hotline, which people can phone if their bond notes are not accepted, plus a connection to the police so that those who reject can be swiftly visited and if necessary arrested, although we would hope that the arrival of the police would move the rejectionist business person to see sense and obey the law.
The other requirement for general acceptance is that the RBZ does not return to the days of hyper-inflation print more than it can back.
A daily report of the total value of bond notes issued will help. So long as this total grows at the same rate as exports and remains below the sum offset as the backing, people will be a lot more trusting.
Convertability on banking, the legal requirement for acceptance and a willingness to keep people totally informed will make the experiment successful, allow the gains of greater liquidity and lower currency smuggling to be realised and make the dangers minuscule.
Online Reporter