Bond Notes will deter economic progress: Madhuku

CONSTITUTIONAL law expert and National Constitutional Assembly leader, Professor Lovemore Madhuku said the new Reserve Bank of Zimbabwe (RBZ) policy that puts a $1 000 cap on all withdrawals discourages the public from using the banking system.

Addressing a public lecture on constitutionalism and the rule of law at the Midlands State University last week, Professor Madhuku said the RBZ policy further weakens the trust between the banking sector and the public.

“Imagine after depositing your money, you are told you can only withdraw $1 000,” he said.

As the cash crisis continues to bite, banks have introduced daily withdrawal limits which are making it difficult for ordinary people and cooperates to withdraw their money.

“If a person has $40 000, do you think they would take it to the bank? They will not because they will not get the money back. This is an example of a legislation  that is already creating problems for the economy.”

Professor Madhuku blamed the Reserve Bank polices together with the  infamous  Indigenization Act for hindering the promotion of socio-economic development.

He also lashed out at the central  bank for contravening the rule of law.

“When customers can only withdraw $1 000 from banks, we say that is rule of law because there is a law that allows the RBZ to do so.

“But in real terms rule of law is not just a law. It’s a law that makes sense,a law that develops the country and stimulates socio-economic development. The law should not be arbitrary and cause confusion,” said Professor Madhuku.

He said the Reserve Bank should either abolish bond notes or come up with strategies that ease liquidity crunch.

“It’s either we have a Zimbabwean currency or we don’t. This measure is not going to solve anything,” said Madhuku.

With the growing cash crisis, RBZ announced that the country will use  bond notes, a move which the central bank say will ease the liquidity crunch.

The introduction of bond notes has been met with skepticism as many fear that prices of commodities will fluctuate as evidenced by the introduction of  bearer cheques  in 2007.

Economic analysts say the introduction of bond notes without prior market consultation in itself defeats any attempts to inspire confidence.

“What is needed is trust in the system and right now we don’t have that because we are living too close to our recent history,” Vince Musewe said.

Former economic planning minister and current MDC-T shadow finance minister Tapiwa Mashakada said government ambushed citizens by introducing bond notes without wide consultations.

“The bond notes have been imposed on the people,” Mashakada said, adding it that this move brings mistrust in the banking system.

“The people have already lost confidence in the banking system, that’s partly why there is no money in the banks to meet depositors demands and these bond notes will not change anything.”

Cash shortages have worsened after Central Bank Governor Dr John Mangudya announced plans to introduce  bond notes with depositors competing to withdraw  their savings from banks.