German firm declines offer to print bond notes

ZIMBABWE’s planned launch in November of its “surrogate currency” is under threat following reports that the German company that was supposed to print the notes has declined to do so.

A spokesman for the German Embassy in Harare confirmed this week that the notes will not be printed in Germany. No reasons were given.

The bond note plan, as the surrogate currency was known, was announced on May 4 as a measure to boost exports by paying a 2.5 per cent to 5 per cent export incentive with the notes as well as a measure to ease the country’s cash shortage.

The issue date for the notes has been postponed several times but as recently as Wednesday a senior central bank official said they would be launched early in November.

The controversial proposal has been assailed on all sides — by civil society, opposition political groups, bankers and business people — but this month Emmerson Mnangagwa, vice-president, said the notes were “a reality, not a dream”.

“We are going to live with it,” said Mnangagwa, adding that legislation was being drawn up to introduce them.

Since the vice-president’s announcement, the investment mood has changed dramatically. The Zimbabwe Stock Exchange, which had been languishing at multiyear lows, has gained 25 per cent in two weeks to 12-month highs as investors and households have switched from cash to assets.

Companies and citizens fear that the bond notes will spark a return to the hyperinflation of 2007 and 2008 when inflation reached billions of per cent.

Those fears have been fuelled by the government’s unmanageable budget deficit, which is projected to reach more than $1bn or 7.5 per cent of gross domestic product this year.

A bank economist said: “Chaotic de-dollarisation cannot be ruled out,” noting that the government has again been forced to delay pay dates for civil servants. The delay has sparked a furious reaction from schoolteachers and health workers who have been told that they will have to wait until next month to be paid.

Police and the armed forces were due to be paid on Friday.