Johns Hopkins University, Professor Steve Hanke is raising alarm towards the downfall of the Bond Note, despite the central bank’s efforts to save Zimbabwe’s local currency.
This follows a continued fall of the local RTGS to US$1:$190 at the parallel market.
“Zimbabwe’s currency is in a death spiral,” says Hanke on his Twitter handle.
“Now, the corrupt government is threatening to suspend all businesses using black-market exchange rates to price goods. I’ve seen this movie before. It has a tragic ending.”
The Situation on the Ground
Hanke’s at a time when Zimbabwe’s annual inflation which has been going down since January from 363.63% to 50.24% in August went up to 51.55% in September according to information from ZimStat.
The Central Bank has revised the forecast on Zimbabwe’s inflation rate to end between 35% and 53%, up from the earlier prediction of 255 to 35%.
The situation has reached the level where Zimbabwean officials agreed to their failure to meet the country’s target of ending 2021 at a below 10% inflation.
Another failure is in closing the gap between the Central Bank’s official rate of US$1:ZWL$ 87.66 and the parallel market rate.
Efforts by the RBZ to Save the Bond Note
Battling to save the local currency, the Reserve Bank of Zimbabwe (RBZ), this week called for a meeting with captains of industry and commerce where stakeholders agreed to maintain the macroeconomic stability, the same measures which are already in place. Officials have not released any new decisions to the public pertaining to the Monday meeting.
The Bank also today directed banks to monitor card swipes in search of money changers, who are accused of destabilizing the economy.
Naming and suspending accounts of suspected illegal money dealers has been a weapon of use by the RBZ.
The Central Bank has also been tightening the money supply in the hope of curbing inflation in the country.
Introduction of Bond Note
Zimbabwe firstly introduced the Bond coin in 2014, followed by the notes in 2016 to address cash challenges with little to no success.
Authorities assured citizens that the Bond notes were equivalent to the US Dollar at a 1:1 rate, but with time the local currency started losing value.
The government later banned the use of foreign currency rendering Bond notes as the legal currency but reversed the decision under the pretext of helping Zimbabwean citizens.