On the 4th of May 2016, the Reserve Bank Governor of Zimbabwe, John Mangudya, issued a press statement wherein he indicated that “the Reserve Bank has established a US$200 million foreign exchange and export incentive facility which is supported by the African Export-Import Bank (Afreximbank) to provide cushion on the high demand for foreign exchange” in the country.
The facility would be implemented through the medium of Zimbabwe “bond notes” in denominations of $2, $5, $10 and $20 and would be introduced into the economy in two months’ time.
The bond notes are set to operate as an extension of the current family of bond coins which were introduced in December 2014 to address the challenge of obtaining small change in daily transactions.
The Reserve Bank Governor further introduced a limit on daily cash withdrawals with the public now only able to withdraw a maximum of $1 000, €1 000 and R20 000 from their accounts, with immediate effect.
He stated that the bond notes shall continue to operate alongside other currencies and at par to the dollar. Mangudya further announced that, with immediate effect, 40 percent of all new US dollar receipts will be converted to rand, “in order to restore and promote the wide usage of currencies in the multicurrency basket.”
Following this press statement, the media has been awash with possible economic justifications/ramifications for the decisions made by Mangudya.
There has also been a public outcry, with most fearing a return to the hyperinflationary chaos that characterized the 2007 and 2008 era in Zimbabwe.
However, missing in the discourse is a consideration of the legality of the announcement and proposed measures by the Governor.
I wish therefore to offer my legal perspective here.
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