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| Hon T Mukupe |
The following
interviewed was extracted from the ZANU PF blog soon after the Reserve Bank
Governor had announced the coming in of bond notes so as to ease cash shortages
in the market. Cde Bernard Bwoni [BB], who is the ZANU PF UK Branch Vice Sec for
Administration interviewed Hon Terrence Mukupe [TM] a Professional Banker, MP
for Harare East and Member of Parliamentary Committee on Finance.
BB- Cde Mukupe welcome.
What benefits are we going to derive from the coming in of notes in the market?
TM-Thank you for
having me. Firstly I must state that the Governor has categorically denied that
the Zim Dollar has returned. He stated that bond notes with denominations of$5,
$10 and $20 are to be introduced, Well the truth of the matter is that the Zim
Dollar is back with another name pegged to the $US at parity.
I must state that I am a staunch proponent of the return of
the Zim dollar as if its correctly introduced it would be good for our country,
key question is now the time, I don’t think so. The question being posed is the
bond notes going to hold that value at parity with the US$?
BB-What strategies has
Dr Mangudya put in place to allay fears and avoid panic?
TM- Let's get
back to basics a currency is a promise to honor a payment. Because currencies
are promise to pay, there has to be an underlying security that gives people
confidence in the currency. What the reserve bank is proposing is that they grace
a $200m facility that will use to back the bond notes.
The $200m facility from Afreximbank is too little to offer
as a guarantee to back the bond notes.
What the Governor is trying to do is to dedollarise the
economy by forcing citizens to use bond notes and rands. So for clarity the
bond notes will only be printed within this $200 million facility?
The expectation is that they should not breach the $200m
mark but the Governor was silent on that.
He said the $200 million facility shall also be used to
discount trade related paper in order to provide liquidity for business trading
operations.
So we now wonder whether the usage of the $200m shall be
publicly made available if it has multiple uses.
BB-Maximum cash allowed to be taken outside
the country has been revised downwards to $1 000, Euro 1 000 and R20 000 from
the previous $5 000 of the challenges we have faced has been a liquidity, an
room for quantitative easing (to address these) and what would be impact of a
breach of the $200 million facility?
TM-Back to basics
the problem we have in this country is that we have the strongest currency in
Africa, every country around us wants the dollar from us. Every country in SADC
is dumping goods on consignment and taking the dollar out,a complete
depolarization would stop this dumping of goods into the country.
Should we force citizens to hold rands or should we incentivize
those that trade in rands? Incentives are always better than foisted situations.
BB- Foisted
situations lead to black markets. So what safeguards are there against
emergency of a black market?
TM- We might end
up recreating a parallel market for cash sales as well as foreign remittances
into the USD. Allow free conversions of currencies; introduce punitive
measures for holding USD such as zero interest and market rates for Rands and
the Euro.
The Governor has not announced any measures of preventing
the parallel market other than remedies available at law.
The Governor does not have a time-frame for the introduction
of the bond notes as they are still at the design stage but possibly in the
next two months. Clearly they have rushed to the mill without having
harvested the grain. Just two final questions from me, how do envisage the
public is going to react? When it comes to cash machines, is it going to be
both USD and bond notes one can withdraw or one of the two.
BB-That is positive.
TM-Positive as
long as the rand becomes less volatile; it appears to have been stabilizing.The ATMs have the capability to dispense both the bond and
the USD, I envisage initial resistance but as always the citizenry will
eventually warm to the bond notes as long add they are not flooded.
My take is we knew this was coming last year when Min
Chinamasa said they would be no money for bonuses. At that point in time we
needed to create the bond notes and not wait for when the wheels have come off.
Bond notes = how to effectively tax the nation. The 200
million is simply an introductory confidence booster. After a while that won't matter - the bond
notes can be printed as demanded by the economy. Reserve Bank of Zimbabwe and
whoever else has a say just have to be reasonable about the quantities they
throw into circulation. The bond notes are a mechanism for us cover the budget
deficit period.
We have a $322m budget deficit, so if the notes are accepted
it will go a long way in normalizing our economy. It’s about being reasonable
with the introduction of the notes and to keep within the limits. Only eat what
you have killed.
BB- Hon Mukupe
what can be done to derive consumer and trade confidence given that Hon Dr
Mangudya has not given enough on the policy to manage the multi currency after
the introduction of the bonded notes? What
incentives are there for a foreign investor who invests in US dollar only for
his money to be converted to a Bond note?
TM: Dr Mangudya
has to assure the nation that they will be disciplined in the issuance of the
bond notes and that every note issued will be fully accounted for and properly
backed. That way consumers and traders will have confidence in the bond notes.
END OF INTERVIEW
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The interviewer : Cde Bernard Bwoni; VC for Admin; ZANU PF UK
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