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Zimbabwe’s New 'Currency': What You Should Know About Bond Notes
A Zimbabwean woman shows off a new bond note outside a bank in the country's capital Harare, November 28. The Zimbabwean government has introduced bond notes in a bid to solve the national cash shortage.
the first tranche of notes for a new pseudo-currency called bond notes on Monday. A $10 million batch of two and five dollar bond notes are now legal tender within the Southern African country, which has been hit by a crippling cash shortage that has seen long queues form outside banks.
For many Zimbabweans, however, the printing of new money brings back harrowing memories of the country’s hyperinflationary era of 2008-09, when inflation reached more than 200 million percent and the Zimbabwean dollar became worthless.
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Bond notes are a parallel currency that Zimbabwe’s government,
, has introduced to deal with a cash shortage and boost exports. According to the reserve bank, bond notes have an official exchange rate of 1:1 with the U.S. dollar, which has been the main currency used in Zimbabwe since 2009. The country already has several million U.S. dollars’ worth of bond coins, to which the notes will be added.
Following the collapse of the Zimbabwean dollar, which was abandoned in 2009, the country switched to a multi-currency system. At least
are now legal tender in Zimbabwe: the U.S. dollar, the South African rand, the euro, the British pound, the Australian dollar, the Botswana pula, the Japanese yen, the Indian rupee and the Chinese yuan. Not all are accepted by Zimbabwean traders, however, with the U.S. dollar being the most widely-used currency. Bond notes are now being added to this confusing mix.
worth of goods in 2014 and imported $6.25 billion, resulting in a negative trade balance of $3.4 billion. Consequently, U.S. dollars have been leaving the country at a greater rate than they’ve been coming in, resulting in a cash shortage. Zimbabwe cannot address the deficit by requesting a loan from international lenders, such as the World Bank or International Monetary Fund—both institutions have suspended their lending plans to the country due to its failure to implement economic reforms aimed at clearing arrears.
1 Inr In Zimbabwe Dollar
A man holds up a 100 trillion Zimbabwean dollar note, in Zimbabwe's capital Harare, June 12, 2015. Opposition groups are concerned that the government's introduction of bond notes could herald a return to the failed Zimbabwean dollar.
The introduction of bond notes has raised the specter of hyperinflation among many Zimbabweans, for whom the memory of the collapse of the Zimbabwean dollar is still fresh. The currency collapsed in the mid-2000s after
, whose policies including the forced redistribution of land from white farmers to black Zimbabweans with little agricultural training. 1 Inr In Zimbabwe Dollar
at around 90 sextillion percent—or nine followed by 22 zeros—and the government redenominated the currency three times, lopping zeros off the end in a vain bid to stabilize the skyrocketing inflation. The price of daily essentials, such as a single egg or a loaf of bread, was north of 1 billion Zimbabwean dollars. Eventually, the government abandoned the currency in 2009, switching to the current multi-currency basket.
about a new form of liquidity being introduced to the financial system. But opposition parties and civil society groups have loudly denounced the new pseudo-currency and are
planning further protests against the new legal tender
in October that Mugabe’s government was exacerbating Zimbabwe’s economic crisis by printing bond notes, which were being “rejected by the people.”
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1 Inr In Zimbabwe Dollar
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