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Leading economist says Zimbabwe must allow bond notes to trade on the forex market

A leading economics professor has urged Zimbabwe’s government to make its controversial bond note currency tradable on the foreign currency market to reduce its externalisation and tackle persistent cash shortages.

The bond notes, a quasi-currency introduced in November last year under a $200 million Afreximbank scheme to ease a crippling dollar note shortage, trades at par with the greenback but is legal tender only in the southern African country.

While the bond note has remained largely fungible against the US dollar in retail, there are fears that it could crash if allowed to float.

The central bank has so far released $175 million worth of bond notes and is looking to print more.

University of Zimbabwe economics professor and government advisor Ashok Chakravati told a business breakfast this morning that government should let the market decide the bond note’s true value.

“The problem with the bond note in my view is the peg with the US dollar, that is the main problem. We have a black market and what is happening is that anyone who wants to trade the bond note for a discount or premium, has to do it illegally on Fourth street or in Messina or at the Road Port or somewhere else,” Chakravati said.

“In my opinion government should remove the peg from the bond note, all that trading happening across the border will come back into Zimbabwe, why should it trade outside the country when you would like it over here.”

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This post was last modified on July 25, 2017 6:33 pm

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Charles Rukuni

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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