THE INTRODUCTION of bonded coins for sole use in Zimbabwe has sparked a wave of uncertainty.
The coins have created fears among investors and the populace that the government is inching towards the re-introduction of a local currency. However, the central bank chief has denied this.
Zimbabwe, hobbled by an economic crisis that has only worsened since President Robert Mugabe won a fresh mandate to rule the country in July last year, is using a multiple currency system.
The rand and the Botswana pula accounted for about 20 percent of monetary transactions carried out in Zimbabwe, the central bank said, with the US dollar accounting for the bulk of the money in circulation.
Analysts have cautioned that the reintroduction of the Zimbabwean dollar, which the government abandoned at the height of an economic meltdown characterised by hyper-inflation in 2009, will cripple business and economic confidence in the country.
Executives told Business Report on Monday that Zimbabwe needed more than five years to fix its economic woes before thinking of reintroducing its abandoned currency.
“We will have to see how it will work out and what mechanisms have been put in place by the central bank to ensure that confidence in the coins as legal tender, which can be used elsewhere besides the supermarkets for change, does not choke us,” a senior executive with one of the international banks in Zimbabwe said.
“But we had been made to believe that the multiple currency would be used for as long as confidence and productivity in the economy is low; we need to fix areas such as productivity and our export sector first.”
Economic analyst Johannes Kwangwari said the government had ill-timed its “prescription for the problems of smaller denominated money”, although “smaller denomination change had become a real problem… to the extent that it was now distorting prices” for goods and commodities.
“It’s a genuine problem, which… could have been solved through the importation of smaller denominated coins from South Africa, Botswana and the US. But the government was complaining that banks and shop owners were not forthcoming on this. In the end we are stuck and the government has resorted to a desperate measure, which could be interpreted as a precursor to the reintroduction of the Zimbabwe dollar,” he said.
The government is, however, hopeful that the bonded coins – which will come into circulation next Thursday, backed by a bond the central bank has secured – will work out for the benefit of easing transactions in the economy.
Finance Minister Patrick Chinamasa told a Zanu PF congress on Saturday that the coins would help stabilise prices in the economy. “This small change is to bring some prices down as we all know that in the shops, people ended up buying sweets which they did not want because of lack of change,” he said.
Reserve Bank of Zimbabwe governor John Mangudya said on Friday that the bonded coins, initially worth about $10 million (R113m), would be issued in denominations of 1c, 5c, 10c, 25c and 50c, while the 50c coins will be released in March.
The “economics of the bond coins is that they are being introduced to buttress the multiple currency system through the provision of change, especially for the US dollar notes, which have the smallest denomination in circulation… of $1,” he added.
He said the bonded coins would be on par with US cents.