By Daniel Chigundu
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says the Bond Note has not as is being suggested by some people, adding that it is the economy that has failed to generate enough foreign currency needed to maintain the 1:1 parity.
Zimbabwe introduced the Bond Note a few years ago as an export incentive scheme and also as a way of easing the liquidity challenges in the economy and the RBZ pegged it at 1:1 with the US dollar.
Mangudya even promised to resign if the Bond Note failed or if it fails to maintain its parity with the America dollar, however, the Bond Note has lost value against the US dollar.
When he appeared before the Parliamentary Portfolio Committee on Public Accounts, the RBZ governor denied that the Bond Note has failed, adding that he actually has many testimonies to indicate that it has actually worked wonders for the economy.
Below is what he said when asked why he has not failed since the Bond Note has dismally failed to maintain its value against the US dollar:
I said If the Bond fails its work, its work was to promote exports, the point is very simple the export incentive in this country has worked, we need to go and call companies that are exporting and bring them here with me to see whether the incentive scheme failed.
People do not know the genesis of the Bond Note, the Bond Note is monetising the export incentive scheme and we said we are going to drip-feed it and people who export we give them 5%, the reason why we give them 5 to 10% was to promote exports and now we are quite happy even today that many firms have increased exports receipts.
For us to be able to be where we are today it’s because those exporters who are the foot soldiers who are the golden goose laying the golden eggs, they have done very well, I can bring them here for your committee one by one to talk about whether this thing failed.
It is in the eyes of the people who do not understand what was the purposes of the Bond notes, not that why it was put in place. We went on a media campaign, the documents are there and you are saying it failed to work but we are saying it worked very well as far as I am concerned as far as exporters are concerned.
To have the foreign currency that we are having today I can mention companies here who were almost not even exporting but they have exported very well so the answer in simple term is that the Bond Note did not fail that is number one and number two, the Bond Note when it was 1:1 it was a genesis of this documentation, if you look at Finance Act number two when we say we now a USD.
We have Bond Notes in this economy of $437 million, and we have deposits in this country of $10billion, so what has failed is not the Bond Note, what has failed is that the economy has expanded much more than the foreign currency that is required in this economy.
It’s the failure of the economy to generate enough foreign currency to maintain its parity and therefore it’s not about Bond Notes, government expenditure increased at a faster rate than the rate at which we were creating foreign currency to maintain the parity.
So the elephant in the room it’s not about Bond Notes it’s about excess government expenditure which have eaten the foreign currency in terms of parity so end of the day it’s because when you have a lot of money, that causes inflation is to have too much money that is chasing fewer dollars, it means the excess expenditure is coming government it means money is increasing in the banks, so Bond Note was killed by deficit financing