Five reasons NOT to trust Mugabe’s central bank chief on new Zimbabwe bond notes currency

Harare – Long queues outside ATMs. Security guards confirming that those machines that are already empty “won’t be stocked until Monday.”

A banking official speaking privately of “truckloads” of bond notes on the move before the weekend.

Zimbabweans are in panic mode following Saturday’s announcement that the central bank is to rail-road through the introduction of this controversial currency-that-isn’t-a-currency, starting with 10 million new notes on Monday. “But I thought [bond notes] weren’t coming yet,” wailed one business-owner.

With the dark days of hyperinflation and rampant currency printing only eight years ago, Zimbabweans aren’t ready to have any hope in these new notes  – even if bank chief John Mangudya says he’s staking his career on them.

Here are five reasons NOT to trust Mangudya on bond notes:

1. Mangudya’s bosses have bonuses to find…

No doubt with an eye on elections in 2018, President Robert Mugabe overturned a decisionby his finance minister Patrick Chinamasa not to pay civil servants’ bonuses at the end of this year.But where’s the hard cash coming from to do so? The authorities already struggle to pay civil servants their regular salaries each month. Chinamasa did NOT rise to the bait in parliament this week and admit that bonuses would be paid in bond notes. But that’s the suspicion. And how do the authorities plan to pay the “thousands” of new soldiers they’re currently recruiting?

2. … and debts to pay off

As anyone who lived through the first inflationary crisis in Zimbabwe will tell you, there are some advantages to “Monopoly money”. If the authorities force shops, businesses and lending institutions to carry on accepting plastic money linked to bond-note filled accounts (and there are already signs that they will), then suddenly paying off a mortgage or a loan becomes very easy. Gushungo Holdings, the parent company of the Mugabe family’s Alpha Omega dairy was reported in June by the Zimbabwe Independent to have a debt of $20m.

3. There should never be trucks full of bond notes.

Mangudya has gone on record saying that there will only be $75m worth of bond notes circulating by December and that these should have minimum impact. Monday’s release is of 10 million US dollars worth (supposedly) in denominations of $2. They should barely fill ONE 12 metre-long lorry.

Here’s the math: if the bank wants to introduce 10 million worth of bonds on Monday in denominations of 2, that means it’ll be pushing 5 million new bills into circulation. An average briefcase can hold about 10 000 separate bills (if they’re brand new and tightly packed). 500 briefcases can hold 5 million notes, give or take some depending on the size of the case. That’s all the money the authorities should be distributing – about five pallets full of bank notes. Less than a large lorry could hold.

True, the trucks transporting Monday’s bond notes may only be taking small amounts of bond notes each (and they’ll also be distributing new bond coins in denominations of 1 US, which will massively add to the weight). But the potential for over-printing is there.

4. Too many mixed messages

Bond notes are not a currency, Mangudya insists. Bond notes are a currency, says VP Emmerson Mnangagwa ( Your bank account won’t be converted into bond notes, says the central bank. Oh but when you try to withdraw money from your US-dollar account at the ATM some of it (or all of it?) will come out in bond notes, says Mangudya ( Over-keen headlines in the state press this week (“Exporters back bond notes”, the Chronicle said on Wednesday) look dodgy. There are big trust issues here.

5. The past is (not) a foreign country 

These new notes look remarkably similar to the old Zimbabwe dollar bills. And we all know what happened to THEM.

An insert in Sunday’s state press shows the designs, complete with the familiar balancing rocks and the Zimbabwe bird. Remember Hector’s granny, the brave Zimbabwean woman who phoned in to a radio station during an interview of protest pastor Evan Mawarire just as he was coming to prominence in May? (He’s now in exile). Hector’s granny spoke of losing her pension because of hyperinflation, and aroused the sympathy of many.

As Zimbabwe stands on the brink of bond notes, there will be many who fear her words will be prophetic.

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