RBZ and ZSE team up to boost investor confidence ahead of bond note launch

RBZ and ZSE team up to boost investor confidence ahead of bond note launch

 THE Reserve Bank of Zimbabwe (RBZ) and the Zimbabwe Stock Exchange have embarked on a path to cajole investors and boost confidence ahead of the introduction of bond notes, expected in early  next month.

In May, the central bank announced it would introduce the bond notes, an issue which was met with scepticism and resistance, with investors and economists expressing reservations over the new currency. Most Zimbabweans feel it is a  way of bringing back the Zimbabwe dollar “through the back door”.

But RBZ governor John Mangudya and ZSE chief executive Alban Chirume, in a joint statement on Thursday, seemed to reach out to
investors where they waxed lyrical on the export incentive facility.

“The Reserve Bank of Zimbabwe advised that a US$200 million foreign exchange and export incentive facility was being established to provide support for an export incentive facility of up to five percent on all export receipts, including tobacco and gold sale receipts. In simple terms, exporters will receive the incentive proceeds in USD and the incentive will be credited to their USD accounts in USD currency,” the two said.

“Zimbabwean bond notes equivalent to the incentive granted will be brought into circulation to fund the export incentive scheme on a gradual basis in line with the receipts of exports proceeds. Thus, there would be no bond notes if there are no exports.”

They said since the local bourse was priced in US dollars, which currency is used for settlement of all transactions, the position would not change when the bond notes come into circulation.

“Bond notes issued for the purpose of incentivising exporters will circulate in the market alongside currencies within the multi-currency system and will be at par, ie one on one with the USD. No separate customer accounts will be maintained for bond notes and settlement of trade executed on the Zimbabwe Stock Exchange will take place in USD through normal banking channels,” they said.

Mangudya and Chirume added that the RBZ exchange control guidelines and compliance framework emphasised that the remittance of capital, capital appreciation, and dividends was in the first priority category of payments to ensure that foreign investors on the ZSE were not “disenfranchised access to their capital”.

Four new bond notes – in $2, $5, $10, and $20 denominations – are set to come into circulation soon. They will be an extension of the current family of bond coins, introduced in December 2014, when Mangudya rolled onto the market the 1c, 5c, 10c, and 25c family of bond coins, and in March 2015, introduced the 50c, which he said was to boost price competitiveness.

The introduction of the new bond notes is to mitigate against possible abuses of the US200m foreign exchange and export incentive facility the central bank has established. – ANA