Zimbabwe’s Parliament has called for stiff penalties for those who do not accept the recently introduced bond notes and those who exchange the notes at a different rate than the stipulated one.
The chairman of the Finance and Economic Planning Committee David Chapfika said banks should now disburse the bond notes through ATMs.
Contributing to the debate on the Reserve Bank of Zimbabwe Amendment Bill, Chapfika said the government should give assurance to the informal sector that it will continue to have access to foreign currency.
The informal sector, which holds most of the cash in the country, should also be encouraged to bank so that it can access foreign currency.
He said that travellers and business people must have access to foreign currency but there should be limits to amounts people can withdraw outside the country to curb externalization.
RESERVE BANK OF ZIMBABWE AMENDMENT BILL (H.B. 12, 2016)
Twenty-Eighth Order read: Adjourned debate on motion on the Second Reading of the Reserve Bank of Zimbabwe Amendment Bill [H.B. 12, 2016].
Question again proposed.
- The Reserve Bank of Zimbabwe Amendment Bill was gazetted on 17 November 2016. The Bill seeks to provide a legal framework for the Central Bank to issue bond notes exchangeable at par value with the United States dollar, on the same basis that it previously issued bond coins. The Bill also seeks to validate the issuance of bond coins currently in circulation.
1.2 Upon gazetting of the Bill, the Committee on Finance and Economic Development resolved to conduct public consultations on the Bill, consistent with Section 141 of the Constitution. The consultations were held from 29 November to 3 December, 2016, in Gweru, Bulawayo, Gwanda, Lupane, Masvingo, Mutare, Marondera, Harare, Chinhoyi and Bindura. The Bill generated mixed views from the general public. Those who supported the Bill felt that the introduction of the bond notes would ease liquidity challenges and facilitate small local market transactions. There were also dissenting voices but would not substantiate their reasons for opposing the Bill other than expressing expressed fears of losing their savings given their experiences with bearer cheques in 2008. A number of recommendations for improving the Bill were however suggested during the consultations and the proposals will be explained later.
1.3 In terms of the consultations, members of the public queried why Parliament did not conduct the consultations for the proposed introduction of the bond notes much earlier before they were released since Government had expressed its intention sometime in June, 2016. Some even called for the use of bond notes to be subjected to a referendum as a way to ascertain the level of acceptance.
2.0 Submissions from the public
2.1 Members of the public who were in support of the Bill argued that the introduction of the bond notes would address the liquidity challenges that were currently being experienced in the country. The expectation was that bond notes would facilitate small business transactions such as buying of fruits, including wild fruits and vegetables. They further noted that the introduction of bond notes would restrict the use of foreign currency to the financing of critical national imports. Some expressed their gratitude that they would now be able to pay local school fees for their children. To that end, they recommended that the Reserve Bank of Zimbabwe should speed up the release of bond notes to enable account holders to withdraw their earnings in reasonable amounts to mitigate against bank charges. They also expressed dissatisfaction with the withdrawal limits imposed by banks which resulted in numerous daily transactions. The small withdrawal limits were now eroding their earnings thereby discouraging savings/deposits. It was further proposed that account holders be allowed to withdraw their weekly limits at once to mitigate against unproductive time spent in bank queues.
2.2 Members of the public also noted that the introduction of the bond notes would curb the externalisation of the limited foreign currency given that they are only available for use in Zimbabwe.
2.3 Participants welcomed the introduction of exports incentives as it would avail more money to the productive exporting sectors of the economy, thereby generating more foreign exchange for the country. They however, proposed the following improvements to the Bill:
a) That the Bill should provide for penalties for any conditional acceptance of the bond notes as legal tender.
b) Serious penalties for defacing the bond notes and those who will subject it to the parallel market for profit.
c) That the Bill should further provide for a guarantee against possible unforeseen losses that may arise at the expiry of the Afrexim-bank loan guarantee;
d) The Bill should provide for the establishment of an independent body to monitor the printing and circulation of bond notes to a maximum limit of the Afrexim-bank guarantee.
2.4 Members of the public who opposed the Bill made reference to the extraordinary hyper inflationary environment following issuance of bearer cheques in 2008 which eventually led to the adoption of a multicurrency system to stabilise the economy. That transition to the multi-currency system, left Zimbabweans exposed with hordes of the bearer cheques which they could not exchange anywhere value.
2.5 Members of the public were concerned about statements attributable to the Executive where a perception was developed that the bond note would be exclusively paid to exporters and that would not be forced on the people. The Committee established that some people were not aware that the bond notes would be available to everybody including non-exporters.
2.6 There were reservations expressed on the provision whereby the bond note is at par with the US dollar. There were allegations that an illegal foreign currency market had already emerged where the US dollar was trading at 1: 0,70 to the bond note. Members of the public questioned whether the bond notes could be used as a store of value just like any other currency.
2.7 Some members of the public advised the Committee that more than 80% of the economy was informalised and the majority of the people did not have bank accounts and yet they import some of their products. They were wondering how they would access foreign currency from the banks.
2.8 Some members of the public who were also opposed to the introduction of the bond notes argued that there was urgent need for the government to revive the local industries. They believed that this would result in increased production for local consumption and exports thereby generating foreign currency. It recommended that the Government initiates policies that are aimed at increasing production.
2.9 There was concern raised on the quality and security features of the bond notes. Members of the public claimed that when one got soaked in the rains the notes would stain their clothes whilst it was observed that the some of the $2 notes were not identical. They called for improvements on the quality and security features on the bond notes.
2.10 Members of the public were of the view that the introduction of the bond notes was actually frustrating an established use of plastic money.
3.0 Committee’s Observations and Recommendations
3.1 The Committee noted that the primary objective of the Bill is to give legitimacy to the bond notes and coins in circulation after the expiry of the Presidential Powers (Temporary Measures). In order to achieve the objectives set out in the Bill, the Committee recommends the following measures stemming from the observations from the submissions received during the consultations:
22.214.171.124 The Bill should provide for penalties for those individuals and corporates that do not accept bond notes and coins as legal tender. Stiff penalties should also be imposed on those found exchanging the notes at a different rate other than the one stipulated in the Bill.
126.96.36.199 The Committee proposes that the Bill should provide a mechanism for recourse at the expiry of the guarantee. This will instil confidence in the public.
188.8.131.52 The Committee observed that some banks have stopped the use of ATMs, much to the prejudice of the banking public. It is recommended that the Central Bank and the banking sector ensure that bond notes are dispensed from the ATMs.
184.108.40.206 In order to address lack of confidence, the Committee recommends that the Executive continues with its publicity campaigns so that all the concerns being raised by the citizens are addressed to achieve total acceptance.
220.127.116.11 The Committee recommends that the Governor of the Central Bank publishes, on a quarterly basis, information relating to the value of exports generated and the corresponding value of bond notes and coins paid to the exporters.
18.104.22.168 The Executive should also consider establishing a Committee which includes representatives of business and labour which limits the issuance of bond notes.
3.1.2 The public must be urged to continue using plastic money so as to ease pressure on cash requirements. To allay the fears of the informal sector, the Government should provide assurance that they will continue to have access to the foreign currency. The Committee therefore recommends that the informal traders should be encouraged to open bank accounts to facilitate access to foreign currency.
22.214.171.124 The Committee recommends that measures be put in place to ensure that legitimate travellers and business people including the informal traders have access to the US dollar. However there is need for limits to be set for withdrawals abroad in line with the minimum daily limits, as measures to curb externalisation by unscrupulous dealers.
126.96.36.199 The Committee observed that Government’s policy inconsistencies and lack of understanding of the bond notes on the part of some government officials and citizens has not helped the situation. The resultant overall effect has been lack of confidence with the bond notes. It is therefore recommended that Government continues with its publicity campaigns.
4.1 Subject to the above recommendations, the Committee supports the approval of the RBZ Amendment Bill. I thank you.