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Wednesday, May 18, 2016

Bond Notes Introduction: Is ZANUPF Readying to Rig 2018?

I have been thinking of the issue surrounding cash shortages in Zimbabwe trying to make sense of it all. However everything does not add up and there are many question marks which raise eyebrows. For starters the Reserve Bank of Zimbabwe presents themselves as being confused, I have seen policy pronouncements that are a day apart talking the opposite. Despite being the custodian of the country’s money, the multi-currency regime made them take a holiday. They do not have a hint of how much currency (notes & coins) is circulating. That vital statistic has been omitted from the monetary policy documents I have been reviewing this morning on their website. I refuse to believe this is just an omission but rather a clandestine move to avoid being put under the microscope. I remember working for one insurance company in Zimbabwe, I was in the workers’ committee and often had to look through financial statements provided by management as justification for unavailability of money for increases. I learnt that it’s easy to be hoodwinked by manufactured numbers by overstating the situation to achieve an end. The things happening in Zimbabwe invoke that sixth of something not being right.

Sudden Disappearance of Currency (Notes & Coins)

I was in Zimbabwe for about 3 weeks up to the beginning of March 2016, there was no hint of a cash shortage and was able to withdraw money without challenges. There was money circulating within the economy. In under a period of 2 months all the money that was available has disappeared ostensibly being externalized by individuals and businesses. It beggars belief that an economy which is on its knees can suddenly suck all the money out in a short period of time.
This would point to a huge spike in demand for money to import goods and services but such a demand should be evident throughout the economy as a stimulus to economic activity but there is no such. Employment and capital acquisition have remained depressed. So we can rule out that there was an increase in aggregate demand spurring imports.

The Imports & Export Situation

In the statements by the Reserve Bank of Zimbabwe, demand for imports has been blamed for the flight of dollars from the economy. We are presented with a picture of sudden events that resulted in instant calamity. It is worthy of note that from January to December 2014 imports were $6.4 billion while exports were $3.1 billion, from January 2015 to November 2015 imports were $5.5 billion while exports were $2.5 billion. It is evident that the ratio imports to exports has not changed drastically to cause a huge shock. The shouting at importers by the governor are misplaced unless he can provide evidence of imports doubling.

The Externalization of Foreign Currency Factor

In the statements by the RBZ we are told of figures in the region of $2.5 billion having been externalized. Now if we are to look closely, that figure is not a small amount of money and we can safely conclude that this money was not externalized by individual citizens. If it is by companies then it would go through banking channels. I wouldn’t envisage a company transporting several millions of worn out notes through the border or airport. Such things are not entirely impossible but can be expected only from high ranking officials in ZANUPF. If companies externalized money then it definitely was through official channels so why are the citizens paying the price for it? Is it not expedient to deal with these companies and make them account? This is akin to the $15 billion which disappeared, the mantra is we know who did it, but we don’t want to do anything. It could be that these companies are connected to the high and mighty in ZANUPF.

Bond Notes


The Cash Economy Position

Estimates put that between 3 – 7 billion dollars is circulating in the informal economy i.e. outside of banking channels. In well run economies the composition of money is in the form of demand deposits and less as notes and coins. Usually notes and coins make up less than 10% of money supply. For such economies a sudden demand for notes and coins can lead to a shortage of cash however Zimbabwe is a predominately cash economy (this can be confirmed by RBZ monetary policy statements). So we can say notes and coins make up 80% while demand deposits make up 20% meaning there is a lot of notes and coins in the economy. If informal economy has $7 billion then formal economy would have about $1.75 billion out of $8.75 billion. If in 2015 an amount of $2.5 billion was externalized then there should be $6.25 billion in circulation. Maybe we can remove $0.5 billion for the first quarter of 2016 which would leave us at $5.75 billion. So where is this money seeing we have run to empty? This is a situation which RBZ governor has completely ignored.

So where is a Semblance of Truth?

The truth is the Reserve Bank of Zimbabwe is being economical with the truth, Dr. John Mangudya is keeping vital information from the people of Zimbabwe. On the ground there is no evidence of the allegations he is making having taken place and devastated the supply situation of currency in the economy. Without proper information we can only speculate as to what is happening and my hunch is telling me something happened, is happening or about to happen. My speculation points towards the following:

Elections – Zimbabwe goes to polls in 2018 which is just over 2 years after the launch of the bond notes. As we have seen previously, ZANUPF cannot win an election unless they manufacture a particular advantage to tilt the playing field. But the use of the US dollar makes it hard for ZANUPF to play around with illegitimate money. The bond notes are a perfect conduit for spinning money just like how bearer cheques were printed and issued to buy foreign currency. Of course we are being told of the notes being printed outside the country and being backed by a facility, nobody can verify that ZANUPF government will toe the line in this instance. It can be a case of make believe only to realize we have been played after 2018 elections. What we are seeing could be a well-planned and coordinated scheme, hearing Patrick Chinamasa being adamant that there is no going back on bond notes makes it even more probable that something is being cooked.


As Zimbabweans we have a duty to ensure a level playing field in the next election by resisting the bond notes unless the RBZ can properly account how the money in the economy was drained. If we can stand firm against bond notes we might as well have delivered ourselves from another ZANUPF rigging scheme. The figures being thrown around look ridiculous and the explanations half-baked. I have no doubt that the ZANUPF government like my former insurance employer want to cook books. The bond notes are a small matter, what we should be clamouring for is a convincing explanation on how all the money which was in the economy was spirited away. After we account for it then we should plug the leakages and bring the economy back to liquidity in a managed way. 

1 comment:

  1. The question is how? How do people resist the bond notes under a 'rule by fear' government???? A leader should rise and make people's silent voices be heard!!!

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