Mugabe says cash crisis is temporary

On May 4, the Reserve Bank of Zimbabwe announced it would introduce bond notes, backed by a $200million Afreximbank facility, as part of measures to ease the cash shortages. The measure has met with strong resistance, with many fearing the new notes point to a return of a local currency.

Mugabe said reaction to bond coins, introduced in December 2014, had also been initially hostile, but that the coins had in the end been accepted by the market. The bond notes would eventually be accepted too, he believes.

“When it started, sure, some were suspicious and hesitant to accept it, but they easily accepted it, the first time. But the second time when it was announced we were going to the second stage of it, ah, so much criticism has come from all quarters,” Mugabe said.

“We think those who are opposed to it are really either politically doing so, or doing so out of ignorance. We know it can work, and it will work.”

RBZ has come under criticism for its handling of the crisis, and Mangudya has himself admitted that communication of the bank’s response may have been better. Mugabe said today that more information on bond notes must be made available to the public, accusing his opponents of driving a campaign of “disinformation” against bond notes.

“The issue of bond notes must be explained to our people, all the more so against virulent disinformation which is being mounted by the opposition.”

When the bond notes enter the market, Mugabe said, “they will certainly prove to be the cure to the challenges we have. But the big cure, naturally, is that we have our own currency, in due course”.

There are fears that government will print more bond notes than provided for under the Afreximbank facility, a fear grounded in how government fueled world record hyperinflation by excessively printing Zimdollars.  But Mugabe insists bond notes in circulation will match what Zimbabwe has in US dollar reserves.

“As our reserves grow, so will the population of bond notes also grow, all to ensure one-to-one correspondence between bond notes in circulation and the USD we hold in our reserves, that is the $200 million that we shall be holding in our banks.”

Mugabe admitted that the decimation of industry is at the core of the crisis, although he repeated his party’s rhetoric that this was mostly caused by economic sanctions.

“Our country, rated second to South Africa in terms of industrialisation in the region, had abandoned manufacturing for trade. There was this shrinkage of the economy due to sanctions and other factors, and industries could not operate as before. They were reduced to producing for the domestic market and not enough to enable us to export.

“We thus were no longer creating wealth, but only trading in wealth created by other economies, by way of irrational imports that were flooding, and that are still flooding, our markets. It’s more of importation, and to import we need the USD, which is now growing less and less in our vaults.”-The Source

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