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RBZ Governor Dr Mangudya

Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mangudya has said bond notes will not go beyond the $200 million cap given that each bank will reconcile exports receipts coming through their customers’ accounts with the amount due as given in the policy.There have been fears among Zimbabweans that the Government would at some point increase the notes allocation to banks and flood the system, thereby causing hyperinflation.

In e-mailed responses to questions, Dr Mangudya said: “There is no excess allocation possible under the scheme, given that each bank will reconcile exports receipts coming through their customers’ accounts with the amount due to them in bond notes as per the policy.”

“Bond notes will be issued through banks against receipt of foreign exchange from the export of goods and services, including Diaspora remittances.

“It is, therefore, a performance-based scheme where the Government is not involved. Banks are the prime movers of this scheme. Bond notes derive their value from the Counter-Cyclical Export Finance Facility which caps the amount.

“The central bank cannot issue bond notes in excess of that amount.

“The central bank cannot issue bond notes when there are no exports. The partners involved are reputable institutions who have a name and international rating and reputation to protect,” he added.

“The central bank is also going to put in place an independent body that would have an oversight role on the implementation of the scheme.

Dr Mangudya said there would not be any factors beyond exports that were precedent for an increase in bond notes circulation beyond the $200 million cap.

“If there are no exports there will be no bond notes. Issuance of bond notes will depend on export performance and where foreign exchange has been received in the country

through normal banking channels.

“Hence, the RBZ is committed to ensure that the country’s export sector improves and to reduce the huge trade deficit to sustainable levels which do not haemorrhage the country’s liquidity.”

He said while bond notes represented one kind of support measure, the RBZ was continuously exploring measures to strengthen the domestic economy in order to enhance productivity, exports and to reduce import dependence.

Domestic industry support measures under the auspices of Statutory Instrument 64 of 2016 which was buttressed by the import prioritisation arrangement through banks were policies designed to improve domestic production and reduce import dependence, he said.

“Imports would not, therefore, remain dominant relative to exports,” he said.

Dr Mangudya said the $200 million backed facility was not a move by the Government to create temporal stability with future repercussions.

“The strategy is that the internal devaluation methodology of incentivising exports as enunciated in the Monetary Policy Statement of September 2016 would be put in place when the cap of $200 million is reached.

“This policy is, therefore, consistent with the objective to turnaround the economy to make it a strong domestic economy. It is not a temporal stop gap measure. The Reserve Bank is apolitical,” he averred.

He also added that there would not be any discrepancy on the Export Incentive Scheme, but as highlighted in the Monetary Policy Statement, the RBZ would give an incentive of up to 5 percent.

Targeted exporters were categorised in such a way that the small-scale exporters would earn 5 percent while large entities would get 2,5 percent, he said

The higher incentive for small-scale exporters was meant to provide the necessary impetus for growing the small-scale sector and also given the fact that the sector’s import demand was low, meaning that more foreign exchange was retained in the country, said Dr Mangudya.

“Large entities have different cost structures as compared to small scale enterprises,” he added.

The RBZ has started a multi-pronged public awareness campaign through the electronic and print media in all major languages and would embark on road shows where it would distribute flyers to the public and address business gatherings across the country.

“We have called on commercial banks to play a significant role to advise their clients on the Export Incentive Scheme and that efforts are on-going to continue to engage the generality of Zimbabweans in different fora on the introduction of Bond Notes/Export Incentive Scheme,” said Dr Mangudya, adding that the RBZ was unequivocally clear that the introduction of bond notes did not mark the return of the Zimbabwe dollar as the macro-economic fundamentals were not yet right to do so. — New Ziana.