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Bond notes never failed – says RBZ governor as he blames GNU for currency problems

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By Alois Vinga & Anna Chibamu


THE Reserve Bank of Zimbabwe (RBZ) has maintained that bond notes never failed, instead arguing that the scheme served its purpose of promoting exports.

Upon the introduction of the notes back in 2016, the central bank governor, John Mangudya vowed to leave office in the event that the notes failed.

Years later, sections of society continue to question why the governor is still in office as they largely believe that the bond notes failed.

But responding to similar sentiment before the Budget and Finance parliamentary portfolio committee Monday, Mangudya maintained that the bond notes were a success.

“I do not believe that bond notes failed. In fact, nobody has come to me with evidence showing that bond notes failed,” he said.

“You will recall that their sole purpose was to serve as export incentives. During that time, this economy indeed managed to increase exports.

“I can give you the number of companies which did so. It was based on 1:1 exchange rate and we expected companies to increase their exports,” he said.

He challenged critics to further interrogate the analysis to establish real facts on the matter.

“Did inflation go up during the bond notes era? No. Even the interbank did not fall. The 1:1 rate did not change. The change to these patterns were a result of decisions made by the business community.

“In January 2018, business organised an indaba at the Rainbow Tourism Group where they said the government should now float the currency.

“That was the decision from the business community not the government of Zimbabwe. The government did exactly what the business community had asked for because there was now more virtual currency in the system.”

GNU responsible for current problems

Mangudya blamed decisions made by the Government of National Unity (GNU) saying they are the root causes of current economic challenges.

“This economy has no capacity to fully dollarize,” he maintained.

“It is not Mangudya who legislated the fixed 1:1 exchange rate. It was by a statute passed in April 2009. When we dollarised, the country had no foreign currency .

“It was by faith, not by sight. We then abandoned our currency and we laid our own currency to rest six feet under. That was a mistake made Zimbabweans.”

He said the prudent step to take then was to leave the local currency limping through with the hard currency as opposed to total abandonment, citing examples that such practices have been upheld in Zambia Mozambique and the Democratic Republic of Congo.

“We were not supposed to dump the Zim-dollar. This is why it has become so difficult to resuscitate that which you had killed yourselves as an economy. That is where we made the mistake,” said Mangudya.

Speaking on unstable prices in the economy, the RBZ governor blamed legacy challenges of the hyperinflationary era as posing a continuous threat to stability.

“If you look at what happens in this country after 2018, there was a rush, people were very worried about inflation, people were very worried about the loss value.

“So, the expectations were very negative and as a result the prices went up in response to the reforms. The challenge we are facing are the expectations.

“People expect prices to be higher because of past experiences. The past experiences which I talked about are the major reason why we have chronic inflation.”