Bond notes: the birth of a new Zimbabwe currency?

While the introduction of the US dollar in 2009 put an end to the hyperinflationary period at a stroke, it also limited options for economic policy making, hiked prices, reduced liquidity, as the dollar is so strong, and domestic growth and productivity is so low.

The Rand as an alternative currency in a multicurrency environment soon got squeezed, and the US dollar dominated. US dollars in a region of weak currencies proved a honey pot for those wanting to exchange into a harder currency, and often illegally moved funds offshore, reducing cash availability yet further.

Returning to a more diverse currency arrangement, with US dollars focused on international transactions, and bond notes, and perhaps the Rand making a comeback, being more for local exchange, has some logic.

Radical and inventive solutions are certainly needed, as Zimbabwe’s economy is in dire straits. Injection of cash to relieve some liquidity problems must be combined with new investment, and increased export earnings.

Whether gaining access to bond notes will incentivise this waits to be seen, and more structural macro-economic measures, combined with improved political relations with investor countries, will have to take place in tandem.

By Ian Scoones- This article first appeared in Zimbabweland

(378 VIEWS)