Monetary policy: RBZ considers devaluing bond notes

By Godfrey Marawanyika

Zimbabwe’s central bank is considering devaluing its quasi-currency as part of a raft of reforms to the nation’s foreign-exchange system, according to a central bank official.

Depreciating the bond notes would be an acknowledgment that the official one-for-one exchange rate is no longer sustainable. It would also mark the second major overhaul to Zimbabwe’s currency regime since October, when the central bank ordered lenders to separate deposits of U.S. dollars and electronic money known as RTGS$.

Since then the cash shortage has led to the closing of factories, the more than doubling of fuel prices to the highest in the world and a surge in inflation. Protests in January left at least 17 people dead.

The Reserve Bank of Zimbabwe may unveil the measures in its Monetary Policy Statement to be announced on Wednesday, said the official, who asked not to be identified because he’s not authorized to speak to the media. Reserve Bank of Zimbabwe Governor John Mangudya was said to be unavailable when his office was contacted.

The decision to adjust the value of bond notes follows submissions by the business community, company officials and individuals about how to formalize foreign-exchange trading in Zimbabwe, the official said. The government supports the move because it accepts the official one-for-one peg to the dollar isn’t working, he said.

Bond notes currently trade at 3.61 per dollar on the black market, while RTGS$ are valued at about 3.75 per dollar.

Zimbabwe introduced the bond notes in 2016 to ease a crippling shortage of cash. Their debut came seven years after the nation scrapped its own currency in the wake of hyperinflation and adopted a basket of foreign units as legal tender.

While the government says bond notes are equal to the U.S. dollar, they’re not accepted by foreign suppliers. That’s resulted in payment problems for companies such as gold miners and grain millers.

Shops charge customers different prices depending on which unit they use to pay, offering big discounts to those who use real U.S. dollars.