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Govt seeks to keep US, Bond Note value at par

By Daniel Chigundu

Ministry of Finance says it will present the 2019 National Budget in US dollars because it is the currency unit of account and that it is looking at measures of keeping the Bond Notes at par with the dollar.

The Bond Note was introduced a few years ago as an export incentive pegged at par with the US dollar but it has seen its value deteriorating in the past months.

Despite the fall in the value of the Bond Note, the government still maintains that the surrogate currency is at par with the American dollar.

Speaking during a Parliamentary Portfolio meeting, permanent secretary George Guvamatanga said they are using the multi-currency framework in determining the currency to use.

“The multi-currency framework denotes that the currency unit of account is the US dollar and the US dollar it doesn’t matter whether it’s in the RTGs or it’s a Bond or it’s the real US dollar.

“This is a multi-currency system and as far as government policy is concerned this is still 1:1 and we are looking at several measures to protect that value at 1:1.

“So there might be some other people who might choose to convert their balances but that is speculation and government will not deal with speculation which is in there in the market, so I would like to reiterate that the unit of account for the budget will be in US dollars,” he said.

There is growing concern in the market over the value and life of the Bond Notes following the decision by the government to separate Bond Notes and US dollar accounts.

When the Bond Note was introduced Reserve Bank governor John Mangudya told the media that depositors needed not to open a separate bank account adding that the same account would do as the currency carried the surrogate currency carried the same value as the US dollar.

The Bond Notes are believed to be backed by an Afrexim Bank facility worthy US$200 million but word doing the circulation indicate that the RBZ could have printed more than what is backed.

The agreement and the terms of the facility have been a jealously guarded secret between John Mangudya and officials from Ministry of Finance and Parliament has tried in vain to get access or get sight of it at least.

This is despite the fact that the constitution mandates Parliament authorise or disapprove any financial obligation that government may acquire or commit to on behalf of the country.

Asked by Honourable Godfrey Sithole of the quantum of Bond Notes in circulation, Guvamatanga said he was not privy to the exact numbers and will need to check with RBZ officials.

“On the Bond Note in circulation I would then like to liaise with my colleagues at the RBZ to actually get the relative amount that is in circulation as well as the contract with Afrexim Bank,” he said.

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