Bond Notes Launch In 45 Days: RBZ

Published: 2016 September 16 03:41:00 (13701 Views)

Reserve Bank of Zimbabwe Governor, Dr John Mangudya announced that bond notes are set to start circulation at the end of October amid gross misunderstanding of the RBZ strategy.

The first batch of bond notes will be circulating with an initial equivalent value of about $75 million which will be injected into the market by the end of the year.

Presenting his Mid-Term Monetary Policy Statement yesterday, RBZ Governor, Dr John Mangudya, appealed to Zimbabweans to have trust and confidence in the bond note strategy.

He said the adoption of bond notes came in the context of incentivising production, a long term strategy for economic growth frame-worked along an export incentive scheme of up to five percent to promote export of goods and services.

“The bond notes which will start to circulate by end of October 2016 will be at par with the US$ (that is; one to one) and will be used and treated in the same manner as bond coins,” said Dr Mangudya.

“In simple terms exporters will receive the incentive proceeds in US$ and the incentive will be credited to their US$ accounts in US$ currency. An exporter will then transact through RTGS, makes foreign payments for imports of goods and services and transact freely within the multi-currency exchange system. It is also important to note that bond notes shall not be forced on people who do not like them.”

The central bank chief said the multi-currency foreign exchange system “is here to stay” as he allayed fears over the return of the Zimbabwean dollar.

He added that the sustainability of the multi-currency system was dependent on the economy’s capacity and ability to generate foreign exchange to meet its domestic and foreign requirements, development and promotion of foreign exchange revenue streams such as exports of goods and services and diaspora remittances.

Dr Mangudya expressed concern over the country’s trade deficit — estimated to be around $2.5 billion per annum — which he said requires a substantial policy shift to promote exports in view of lack of competitiveness of Zimbabwean exports.

He said this reality gave the Government impetus, through the apex bank, to introduce the performance related export bonus scheme of up to five percent to exporters.

“The funding mechanism of the export incentive scheme will be through bond notes in order to preserve the offshore $200 million counter-cyclical facility that has been arranged to support the export bonus scheme from externalisation and/or capital flight, which has continued to negatively affect the economy since dollarisation in 2009. The bond notes will be zero-coupon, tax-exempt debt instruments,” he explained.

The Governor said the issuance of bond notes has a self-control mechanism in that when there are no exports there will be no bond notes. He said the bond notes will be gradually released into the economy “in sympathy with export receipts through normal banking channels up to a maximum ceiling of the facility of $200 million.”

The ceiling would be attained when total exports are around US$6 billion, he said.

- Chronicle

Tags: Bond-Notes, Mangudya, RBZ, ,

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