Harare - Zimbabwe will introduce local bank notes, known as “bond notes”, at the end of October, the central bank governor said on Thursday, raising fears of a return to a domestic currency abandoned in 2009 as hyperinflation soared out of control.
Zimbabwe is in the throes of its worst financial crisis since it switched its currency for the US dollar, and the new notes in small dollar denominations are meant to help address cash shortages that have fuelled protests against the government.
Reserve Bank of Zimbabwe Governor John Mangudya said during a monetary policy statement, the equivalent of $75 million in the notes would be circulated by year-end, adding the bank was “very far” from re-introducing a local currency.
He sought to allay concerns of a return to rampant money printing and inflation rates that peaked at 500 billion percent, by saying that the notes would account for less than one percent of the $6 billion held in bank deposits.
An independent body would also monitor the printing and circulation of the $2 and $5 denominations to make sure things did not get out of control, he added.
“It's about trust and confidence and we are saying if you don't want them (bond notes), don't take them. We won't overprint the bond notes,” Mangudya said.
‘Madness’
But activist leaders said the scheme would not answer their concerns and promised more rallies against economic hardships and the man they blame - 93-year-old President Robert Mugabe.
“They (the bond notes) are not acceptable. It's a way of trying to steal our money. Our action on the ground will demonstrate our resolve to stop that madness,” said Promise Mkwananzi, the leader of the #Tajamuka protest movement.
Memories are still fresh of the hyperinflation considered by the International Monetary Fund as the worst for any country not at war.
The crisis led to the release of the 100 trillion dollar Zimbabwean dollar note - the single largest known bill to be printed by any central bank. Shoppers carried stacks of money in plastic bags as prices changed several times daily.
The introduction of the US dollar as the official currency halted the sky-high and accelerating inflation.
Mugabe did not release a statement on Thursday, but has called bond notes a “surrogate currency” that would prevent foreigners taking greenbacks out of the country and improve liquidity.
An executive at a Harare commercial bank said most people wanting to withdraw cash would eventually get bond notes.
“Most people still withdraw cash and because it is scarce, it is most likely that you will be given bond notes at your bank and it stops being an option,” said the executive.
Mangudya said Zimbabwe had imported $250 million cash between May and September. He also said the central bank had agreed with banks to cap interest rates at 15 percent.
REUTERS