US dollar note trade rages as Zimbabwe braces for ‘surrogate currency’

As Zimbabwe’s banknote shortage intensifies, ahead of the twice deferred introduction of bond notes, the trade of electronic US$ for physical notes has increased, at a premium of as much as 20 percent.

To manage the bank note crisis, banks have continued to reduce cash withdrawal limits — on average, individual clients can hope to get $50 per day from the bank after standing in the line for hours, while companies can access up to $300 in most cases.

Although the use of electronic payment platforms such as point of sale machines or bank transfers has increased considerably, Zimbabwe’s largely informalised economy means the bulk of transactions are still on a physical cash basis.

While the Mangudya central bank’s threats are not quite at the level of Gono’s — many bankers and business executives were arrested at his behest over a variety of allegations — many see a similar pattern emerging.

However, Mangudya’s communication of his currency plans has drawn unfavourable comparisons with publicity hog Gono.

Whereas Mangudya’s communication is reluctant at best and confusing at worst, Gono inundated the public with newspaper adverts, colourful supplements, televised policy pronouncements and radio jingles.

Meanwhile, the longer the bond notes take to materialise(their launch has been deferred at least twice), the more Zimbabwe’s crisis-weary public fervently holds onto the hope that the government could abandon plans to issue them.

Many consider the introduction of the bond notes as a ruse to bring back a much-loathed local currency through the back door.

With many once again spending long hours or even sleeping in bank queues where the spectre of hyperinflation, disappearing savings and food shortages loom large, the introduction of a local currency, by any name, stokes visceral fear.

However, President Robert Mugabe and his government rarely cave in to public pressure, or economic orthodoxy. Mugabe has defended the bond notes, saying criticism of the plans to introduce the currency is being driven by politics and ignorance.

The International Monetary Fund (IMF) has projected negative economic growth of -0.3 percent this year and a further slide of -2.5 percent in 2017, snapping a seven-year run of positive growth.

Now, a perfect storm is brewing — an intransigent government averse to reform and a petrified populace with no confidence in the government and its management of the economy.- The Source

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