Zimbabwe to continue importing US dollars

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Government will continue importing US dollars as the introduction of bond notes onto the market will help in reducing the import bill, Finance and Economic Development Minister Patrick Chinamasa has said.

US dollars

US dollars

Minister Chinamasa said it was very expensive to import physical cash as it is paid for in US dollars. Speaking to The Sunday MailMinister Chinamasa said: “The point I am making is that we are using our US dollar receipts from exports such as tobacco, gold, platinum, nickel and chrome to import physical cash.

“The tragedy that we are then having is that after we spend a lot of money importing the cash, people come and mop it up and get it out of the country. So, one of the advantages of bond notes is to ensure the valuable US dollars that we import are not mopped up but remain in the country for use for critical purposes.

“The very precious US dollars which cost us a fortune to import have been disappearing like water through a sieve. We cannot continue importing physical cash so that it comes and disappears from the system. So, bond notes will ensure not all that we have is mopped up.

“What I want to reiterate is that we will continue to import the US dollar, but the coming in of bond notes means that they will help us reduce importing the US dollars by a fraction. We use a multi-currency system; so under that multi-currency system, the US dollar will remain because we will continue to import it.

“We are also encouraging use of other currencies in the multi-currency basket, particularly the South African rand. This is why Government departments have been directed to accept other currencies such as the rand, pula, Australian dollar, pound and other currencies in the multi-currency basket.”

The Minister said bank depositors should not be apprehensive about bond notes as authorities have instituted sufficient measures to ensure the financial services sector remains stable.

Minister Chinamasa said roughly US$6, 6 billion was circulating domestically, but a huge portion of it was quickly being externalised. As such, he added, authorities would maintain production-stimulating strategies while preserving the greenback.

“Bond notes are a medium of exchange and will ensure we preserve our hard-earned

foreign currency. Serious people will support serious policies like the introduction of bond notes. Soon we shall observe a quick turnaround of the economy through the use of bond notes.

“It has never happened that countries use the global currency reserve as a medium of exchange. What gives any currency strength is confidence and trust. As Government, we are happy with the overwhelming support the bond notes have received so far.”

He continued: “Information I have received shows that the exercise is going on well, although there are a few teething problems. But these will soon be addressed. Our banking sector is very stable and your money is safe because we have successfully implemented financial sector stability initiatives.

“We have about US$6,6 billion exchanging hands in the streets. And do you know that we have to import that money? And that money then goes out of the country like water from a sieve. We can’t afford that.”

On November 28, 2016, the Reserve Bank of Zimbabwe introduced bond notes to help ease constipated cash circulation which began about six months ago.

US$12 million was injected into the market in US$2 and US$1 denominations, and more of the notes are expected to be released in coming weeks to reach the set US$200 million threshold. Most businesses have embraced the notes, with point of sale transactions increasingly becoming the ideal complementary alternative.

Zimbabwe’s liquidity problems have largely been attributed to illicit financial outflows, a huge trade deficit and underutilisation of the full multi-currency basket adopted in 2009.

Though the RBZ has over the months imported millions of United States dollars to address the matter, authorities believe throwing bond notes into the mix will bring stability and growth.

Minister Chinamasa said, “The introduction of bond notes was meant to protect the golden hen that lays the golden egg because none of us generates the US dollar yet people claim that ‘the dollar is mine’.

“The US dollar should never be used as a medium of exchange in buying basic goods produced locally, and this will also encourage production because there is a ready market.”

Harare-based economist Dr Gift Mugano added, “There are two points to that. Firstly, the bond note, if used properly as it stands, will stimulate exports and remittances where 3 percent goes to the exporter and 2 percent to the money agent. So, it is incentivising.

“Previously, when sending money, you would get charges; so those charges were scrapped. That, in itself, is a step in the positive direction. This is a catalyst to development. Look at Cape Verde and Ethiopia, for example. They get funding from remittances. So, if the bond note is not abused, it becomes very important as it is the key to development.”

Dr Mugano went on, “If only we could put more effort into encouraging people to bring money back home. Secondly, the export challenge is that it is not competitive, particularly because of availability of finance.

“Therefore, do not look at a bond note in isolation. It is to exist in support of and adding value to existing measures. Export triggers development and liquidity will improve if exports go up.

“Hence, any measure that is positive is welcome. People should believe in the whole policy, no matter our differences, and just support the thrust.”

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