Zimbabwe releases more bank notes, threatening a repeat recession

A man is holding Zimbabwean dollars that are no longer in use. (Philimon Bulawayo/Reuters)

A man is holding Zimbabwean dollars that are no longer in use. (Philimon Bulawayo/Reuters)

As Zimbabwe’s cash crisis worsens, the central bank will release $300-million worth of new bond notes in the next two weeks.

News 24 reported in July that Zimbabwe’s central bank had vowed not to release more than $200-million worth bond notes as central bank chief John Mangudya was fearful of fuelling the kind of hyper-inflation that forced Zimbabwe to ditch its currency in 2009.

To date, over $160-million have been released.

Zimbabwean authorities are now threatening to arrest business people who hoard bank notes for resale to Zimbabweans who can’t get them out of their bank accounts.

The state-run Sunday News quoted Mangudya saying that these notes, like the first $200-million released in November, are backed by a loan from the African Export-Import Bank.

Cash hoarders ‘will be arrested’

Meanwhile, police and anti-corruption officials have threatened to arrest bank tellers, supermarket managers and mobile money agents for “hoarding cash”, the paper said in a separate report.

“We know that this is a syndicate and we are going to round them all up”, said Phyllis Chikundura, spokesperson for the Zimbabwe Anti-Corruption Commission (ZACC).

“Our auditors and police are investigating and a lot of ground has been covered. The long arm of the law will soon descend on the criminals.”

Dollars act as ‘a gold standard’

The notes are paid out as an incentive to exporters like tobacco farmers, gold miners and to Zimbabweans who are sent hard currency from relatives abroad.

“As long as the facilities are there to bank bond notes it’s more like a gold standard, you issue an instrument that is backed by something so that it becomes convertible. We can’t just issue something out of a thumb suck”, Mangudya added.

The bond notes have done little to ease cash shortages. Massive queues are visible outside most banks each month-end as depositors struggle to withdraw cash.

The situation is forcing more and more Zimbabweans to turn to plastic money and electronic transactions.

Forex available on black market

Retailers say that they have to purchase scarce foreign currency on the black market to pay suppliers outside Zimbabwe’s borders.

Many Zimbabweans fear a rerun of Zimbabwe’s last economic crisis which peaked in 2008, when “bearer cheques” lost value rapidly and hyperinflation chased goods from shop shelves.— News24

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