ZIMBABWE’s opposition condemned the government’s plan to print a local version of the US dollar as “madness” on Monday, as panic set in over a crippling cash shortage.
“The printing of bond notes will be the death knell to this economy,” the main opposition party, the Movement for Democratic Change (MDC), said in a statement. “Zimbabweans have walked this road before. They have not forgotten the dark days when they were poor quintillionnaires.” Zimbabwe adopted the US and South African currencies in 2009 after hyperinflation peaked at 231-million percent, rendering the national currency worthless.
A recent shortage of foreign notes prompted central bank governor John Mangudya to unveil measures including limiting withdrawals to $1,000 per day and printing a series of tokens, called bond notes, rated at par with the US dollar.
“The MDC is preparing a robust response to this madness and the party reserves its right to mobilise the people against this ill-advised decision which is certainly not backed by economic logic,” the party said.
Bond notes will complement bond coins, which were introduced in 2014 to tackle a lack of small change. The notes, which Mr Mangudya said were “at design stage”, will be in denominations of $2, $5, $10 and $20.
They will be backed by a $200m support facility provided by the Afrexibank (Africa Export-Import Bank).
Mr Mangudya’s announcement last week prompted panic, with long queues of desperate depositors trying to withdraw their money at banks and automated teller machines.
Economists blame the cash shortage on lack of investment and a trade deficit which saw the country’s import bill standing at $490m in the first quarter against $167m in exports.
The central bank will distribute units with face values ranging from $2 to $20, pegged to the US currency, central bank governor John Mangudya said on Wednesday, describing them as “bond notes” that add to bond coins already in circulation.
Banks have limited cash withdrawals and shut down some ATMs in Zimbabwe, where residents use a mix of currencies including the greenback, yuan and rand.
Mr Mangudya did not specify how the value of the notes would be guaranteed.
“It’s zombie money, made from nothing,” said Fredmore Kupirwa, who sells sodas, canned food and maize meal from his shop in Mvurwi, a town north of the capital, Harare.
Mr Kupirwa said he needed to pay some cross-border suppliers in dollars. “I must pay them in dollars, but if my customers are paying me in this stupid currency, how can I restock?”
The central bank will also convert 40% of all bank deposits resulting from exports to rand, and a further 10% to euros, Mangudya said. Former finance minister Tendai Biti, who now heads the MDC-Renewal opposition party, said Zimbabweans would reject the new currency.
“It’s a cynical, disrespectful and contemptuous move that has no logic,” Mr Biti said. “It’s the return of the Zimbabwe dollar, marking a gross admission that the regime has failed and will drag everyone down into the abyss.”
The start of state-sanctioned seizures of white-owned commercial farms in 2000, by black subsistence farmers deprived of land during colonial rule, slashed exports of crops ranging from tobacco to roses, triggering a nearly decade-long recession.
That caused hyperinflation and the introduction of currencies including the dollar as legal tender. As the dollar strengthened against currencies like the rand, imports became cheaper, causing plants in Zimbabwe to shut down and local production to halve.
The main opposition Movement for Democratic Change predicted on Thursday that the ruling Zanu (PF) would end its multicurrency system before the year is over.
“Faced with this crisis, the government is likely going to completely de-dollarise by December 2016,” it said in a statement. “This will plunge Zimbabwe back into the era of hyperinflation.”
Busisa Moyo, president of the Confederation of Zimbabwe Industries, said the notes printed by the central bank might relieve the cash shortage but would not address the cause of the crisis. “What’s needed is to address the problem of excessive imports and the lack of foreign direct investment,” he said by phone.
Mr Kupirwa, the trader, said shoppers and businesses would struggle to have confidence in the bond notes.
“They’re saying is it a US dollar, or it is worth a US dollar, but how?” he said. “A US dollar must be printed in America, not in Harare. If it is printed in Harare, it is a piece of paper, ghost money, worthless unless (US President Barack) Obama tells me it is a proper dollar.”