Zimbabwe to print dollar equivalent notes

Zimbabwe says it will introduce “bond notes” equivalent to the United States (U.S.) dollar by the end of next month, raising fears of a return to the hyperinflation that wreaked havoc to the economy several years ago.

The country, which adopted the U.S. dollar and South African rand in 2009 after inflation rendered the local currency worthless, has run out of U.S. dollar notes in recent months. It hopes to ease cash shortages by printing notes issued by its own reserve bank, starting with small denominations of $2 and $5.

“The bond notes will start to circulate by the end of October and will be at par with the U.S. dollar,” John Mangudya, the governor of the Reserve Bank of Zimbabwe, said in the capital, Harare.

“We anticipate by the end of the year $75m will be in the market.”

But analysts said the token currency would not hold its U.S. dollar value and would be seen as a new version of the local dollar, which was rendered worthless by hyperinflation – which peaked at 500 billion per cent in 2009 – sparked by a decade-long economic crisis.

“It will immediately destroy trust. The trust is not there and the value of the bond note will not be sustained,” Harare-based economic analyst John Robertson told AFP news agency.

“There is no money because there is no new investment. There is no investment because there is no trust – and you can’t fix that by printing more notes.”

With the government again printing its own money, many in the country fear a repeat of the excessive printing that led to hyperinflation.

“No to bond notes” has been among the regular slogans heard in a wave of protests that shaken the government of President Robert Mugabe this year.

But Mangudya denied the new bond notes would be rejected by many Zimbabweans.

“It is critical to emphasise that the introduction of bond notes does not mark the return of the Zimbabwe dollar through the back door,” he said.

The new notes will be printed in Germany and backed by a $200-m support facility provided by Africa Export-Import Bank (Afreximbank), the government has said.

The country’s cash shortage has forced the government led by Mugabe’s ZANU-PF party to delay paying salaries each month to civil servants and the military.

Zimbabwe once removed 12 zeros from its battered currency at the height of hyperinflation in 2009 when the largest note was the $100tr denomination. Bond coins valued in U.S. cents were introduced in Zimbabwe in 2014 to provide small change.

Further anti-Mugabe protests are planned for tomorrow, despite a police ban on rallies in Harare.