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IMF assesses Zimbabwe's plans to introduce bond notes

Xinhua, June 6, 2016 Adjust font size:

The International Monetary Fund (IMF) says it is assessing the implications of Zimbabwe's intention to introduce bond notes to deal with the current cash shortages in the economy.

"We are currently assessing the implications of the measures on the economy, including the more recently announced issuance of bond notes; and we'll engage in further discussions with the authorities with regard to their strategies," said IMF deputy spokesman William Murray.

Zimbabwe has been facing cash shortages since March which have resulted in the central bank introducing a number of measures to deal with the challenges, including limiting withdrawals.

Murray said the IMF, which recently concluded the third and final review of Zimbabwe's 15-month Staff Monitored Program, was going to have more discussions with Zimbabweans on bond notes.

The IMF official said the cash shortages were mainly a result of weak external inflows and a decline in prices of commodity exports.

Zimbabwe's economy relies on export of agricultural and mineral raw materials.

"More recently the situation has been aggravated by the drought afflicting Zimbabwe. The government had to increase its food imports to mitigate the impact of crop failures on its people," he said.

The central bank has said it will introduce the bond notes in October, which will be backed by a 200 million U.S. dollar Africa-Export-Import Bank (Afreximbank) facility.

However, the planned introduction of the bond notes has been met with mixed feelings with the majority fearing that the government was trying to re-introduce the moribund Zimdollar through the back door.

Central bank governor John Mangudya has tried to calm the public by saying that the notes will be paid out as an incentive to exporters.

Since the announcement of the notes, there have been panic withdrawals as people fear losing their U.S. dollars.

Zimbabwe is currently using a multiple currency system, dominated by the dollar.

Finance Minister Patrick Chinamasa recently said Zimbabwe was consulting Afreximbank, the IMF and World Bank to explore mechanisms to put in place to prevent abuse of the bond notes and ensure that they are issued relative to quantum of exports generated in the economy. Enditem