Zimbabwe: Will bond notes alleviate cash crunch?

Zimbabwe bond notes have been hailed by the government as the answer to the country's cash shortages. But not all Zimbabweans are convinced.


Braving long, winding queues to withdraw money from a bank is a part of everyday life for most Zimbabweans. A shortage of US dollar – the adopted currency in the country after the Zimbabwe dollar became defunct due to hyperinflation – has led to Zimbabweans being restricted to withdrawing $100 per day.

In 2008, withdrawing money was easy although the supermarket shelves were bare; but, in a reversal of fortunes, supermarkets are now bountiful with goods, however, the cash to buy shopping is unavailable. The shortage of greenbacks has led to public sector workers, including doctors, teachers and nurses, being paid late, and the few remaining industries have been forced to cut staff or shut down altogether.

To rectify the cash shortages, the Zimbabwean government has pledged to introduce bond notes backed by a $200m Afreximbank facility in early November. The notes will have equal value to the US dollar and will initially come in denominations from $2 to $5.

However, many Zimbabweans have voiced their opposition to the bond notes and have accused the government of trying to reintroduce the Zimbabwe dollar via the backdoor. Opposition politicians have claimed that the bond notes will scare away prospective investors while hurting trade. The government has denied the accusations while claiming that the bond notes are actually an export incentive that will actually bring in US dollars.

Zimbabwe’s economy is in recession after experiencing a steep decline since 2013, with the economy shrinking to minus 3,5% this year. The country’s debt has also ballooned to over $8bn, of which $1.8bn is arrears.

Clearing debts

The issuing of the bond notes comes as Zimbabwe has cleared its 15-year-old financial arrears worth $107.9m with the International Monetary Fund (IMF). Despite the settlement, Zimbabwe does not qualify to receive IMF loans because the country still owes the World Bank over $1bn and the African Development Bank (Afdb) more than $600m in arrears which must be cleared first.

“Access to IMF resources would first require the establishment of a credible plan to clear arrears with other international financial institutions and with bilateral creditors, in line with applicable Fund policies,” the IMF said in a statement. “It would also require implementing a strong reform agenda to restore economic stability and foster sustained and inclusive growth.”

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