Following the currency switch from ZWL to ZiG most informal traders are no longer accepting bond (ZWL) notes. The few that are accepting these notes are doing so at an astronomic rate of $40 000 ZWL bond notes to 1 USD. The RBZ has given those with bond notes a 21-day grace period to make the switch but most traders have simply decided to refuse to accept the notes. This means that the $100 ZWL “bond” note is effectively dead.
Why the informal sector is no longer accepting bond notes
Just this Thursday the bond note was trading at a rate of $7 000 ZWL and sometimes even $6 000 ZWL per 1 USD. This means that if a person tomatoes at Mbare Musika worth US$0.50 they would get either $3 500 ZWL or $3 000 ZWL as change. Because the government had religiously avoided printing bond notes the rate for bond notes barely moved. When the RTGS (electronic ZWL rate) moved to $40 000 ZWL on the black market and $33 000 ZWL on the formal market, the bond note remained strong at $7000 ZWL. This saw the bond note being used extensively for change at this rate in the informal sector at this rate.
- In the informal sector and on the black market bond notes also known as ZWL cash were trading at a rate of $7 000 ZWL per 1 USD.
- In the meantime, RTGS or electronic ZWL bank balances were being traded at a rate of $40 000 ZWL on the black market and about $33 000 ZWL on the official interbank rate.
- The government and banks use the same rate for ZWL cash (bond notes) and RTGS (electronic ZWL).
- This means that the government and banks are converting both ZWL cash (bond notes) and RTGS by dividing using a factor of 2498.7242.
- What it means is that if you had $1 000 000 ZWL cash you get $400 ZiG or just US$30 just like someone who had $1 000 000 ZWL (RTGS). However on Friday before the announcement $1 000 000 ZWL would have been converted to US$142 or 1 925 ZiG
The sudden movement of the rate from $7 000 ZWL to $40 000 ZWL in a matter of seconds as soon as the governor made his announcement. The sudden movement has resulted in massive losses in the informal sector.
The informal sector suffers massive losses
Unaware of the impending change a lot of informal traders were still accepting bond notes at the rate of $7 000 ZWL as to 1 USD as late as Saturday 6 April 2024. Savvy buyers rushed to places like Mbare Musika where they dumped their bond notes on unsuspecting farmers and other informal traders. Traders only became suspicious late in the afternoon when they heard that the government would only be taking bond notes at a rate of $33 000 ZWL.
As has become the norm it was the older traders who were left holding the lurch. They trusted the government when they were told that bond notes would continue to be widely accepted, they never understood the rate disparities. The truth only dawned on them when it was too late. The angry traders we spoke to expressed their disappointment and said it would make it harder for them to trust the government again when it came to economic and currency issues.
An ignominious end to the bond note
The bond note was introduced years ago by the former governor John Mangudya. At first, the main purpose was to fill the change void. The government swore up and down that only US$200 million would be printed. In 2019 the government used these bond notes as a basis for introducing the ZWL which became the sole legal tender in Zimbabwe. The public revolted, and the government relented and reintroduced the multi-currency system. The era of the bond was marred by broken promises and sudden policy changes on the government’s part from the start.
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