There is rising criticism against a proposed move by the Reserve Bank of Zimbabwe to introduce bond notes, with former Mutare Mayor Brian James, saying this is a redundant move which will fuel inflation.
James told 263chat that plastic money was the better alternative, although he was quick to point out that government would need to make investment into the enabling technology.
The former mayor, who is also a business man, sad they will not be accepting the bond notes in their businesses, as he claimed that the economic crisis is because people have lost faith in the government.
“I think the bond paper or bond notes as they call them is a no brainer because it will push us into inflationary situation, plastic money is the way to go but it’s not something that happens overnight.
“It is something that needs technology to be built on so people can get to use that, so that’s an obvious route to take, but the bond notes is a dangerous move.
“I for one on our business will refuse to accept them, because we don’t trust the government in restricting the amount that they will print,” he said.
James said this mistrust was not an individual perception but was across the board, as Zimbabweans have endured one of the worst hyper inflationary period where the economy shrank considerably.
He said there were concerns that like the hyperinflationary period government will use the bond money to suck hard currency out of the system.
“We will end up with pretty much the same situation we had in 2008. The government will suck all the hard currency out of the system and we will be left with worthless paper, that we will not be able to utilize to keep our businesses afloat,” he said.
James warned of impending empty shelves in retail shops, currently filled with imported goods, with the locally produced goods having imported elements, saying these retailers will soon run out of steam.
“In particular if you look at the supermarkets here I would say that a lot of the goods will fall away because a lot of them are imported, even though some are produced locally they probably have imported content to them.
“If the government sucks all the hard currency out of the system it will be difficult for them to access those raw materials and shelves will start emptying, the same will go for spares and other imported goods.
“Government need to look at their own policies and the bottom line is we don’t trust the government and they need to accept that fact,” he said.
Zimbabwe recorded a trade deficit of $323 million in the first quarter of the year, an indication the country continues to rely on foreign-produced goods in spite of government efforts to halt the tide, latest trade data released by the Zimbabwe National Statistics Agency (ZimStat)
ZimStat shows that 2016 first quarter imports amounted to $490 million against $167 million exports, which remains heavily skewed towards consumptive products following a significant drop in raw materials importation.
Most of the imports were consumptive products such as bottled water, sugar, soap, cooking oil, cellphone handsets, electronics, vehicle spares, vehicles, generators and second hand vehicles.
The exports in the period under review included beef, tobacco and other agricultural produce, as well as wines, minerals and scrap metal. Cumulatively, to March, Zimbabwe’s imports stood at $1,3 billion while exports amounted to $626 million.
The RBZ also shows that in 2015, Zimbabwe exported manufactured goods worth $475,2 million, 7% lower than in 2014.
“We need to look at the import export disparity and the balance of payments to unlock funding from the Bretton Woods Institutions otherwise without that this move will further impoverish the economy in the long run.”
“This move is only addressing the symptoms of the real challenges that we have in the economy without addressing the underlying challenges. It’s very short term.
“We need to address the fundamentals and boost productivity as the manufacturing industry is operating at below average capacity utilization, we need to look at the issues of Foreign Direct Investment by addressing the ease of doing business.
“If these core issues are not addressed unfortunately this move will draw us back into the hyperinflationary era of the Zimbabwean dollar,” he said.
Adding that, “We need to look at the import export disparity and the balance of payments to unlock funding from the Bretton Woods Institutions otherwise without that this move will further impoverish the economy in the long run.”
