ZIMBABWE’S history of policy inconsistency has once again been laid bare after the central bank announced that bond notes which should have been phased out by end of April will remain in circulation until further notice, analysts have observed.
BERNARD MPOFU
The southern African nation is lowly ranked on the World Bank Ease of Doing Business Rankings, with experts saying policy flip-flopping as one of the factors unnerving investment inflows into the country. Zimbabwe is also lagging its regional peers in terms of foreign direct investment despite being endowed with vast mineral resources.
The Reserve Bank said the new currency would be backed by foreign currency and gold reserves.
After launching the country’s new currency, Zimbabwe Gold (ZiG), on 5 April, the central bank’s new governor John Mushayavanhu told journalists attending the launch that bond notes or the Zimbabwe dollar, which had been in circulation since 2016, would be phased out by the end of that same month.
However, barely 48 hours after the deadline had lapsed, Mushayavanhu told a local radio station, Star FM, which is a unit of the state-run Zimpapers Group that the bond notes would remain in circulation until further notice.
This backtracking means ZWL notes will operate along the ZiG, whose notes came into circulation on Tuesday, 30 April.
ZiG notes and coins were released first and have since been accessed by the public.
“We are currently allowing them (bond notes) to co-circulate. And we will let the market know when the volumes of bond notes coming through have thinned out,” Mushayavanhu said.
“We will then advise a date to say, ‘After such and such a date, we will no longer be accepting bond notes. But for now, let them come through. We don’t want a situation where someone is sitting on bond notes and they are deep in the rural areas.”
Responding to Mushayavanhu’s remarks, prominent local economist Professor Gift Mugano said the new currency will eventually fail for a number of economic reasons.
“In the history of the Reserve Bank of Zimbabwe governors, I have not seen or heard of confusion and policy inconsistency of this magnitude!” he said on his X handle.
“Folks, when I say that ZiG will fail, you shout at me. So in all honesty, you really think the ZiG will hold on and entrench itself as the currency of choice?”
Just recently, the World Bank has subtly distanced itself as the driving force behind the introduction of Zimbabwe’s new currency.
The multilateral lender said it only offers policy advice to several countries, member states like Zimbabwe who have the prerogative or discretion to choose a currency of their choice.
This was in response to Reserve Bank governor Mushayavanhu’s claims that ZiG was the brainchild of the Bretton Woods institution.
Mushayavanhu claimed that the World Bank was central to the ZiG initiative through consultancy.
The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. Its five institutions — International Bank for Reconstruction and Development, International Development Association, International Financial Corporation, Multilateral Investment Guarantee Agency and International Centre for Settlements of Investment Dispute — share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development.
