About $9,6 million worth of bond coins is now circulating in the Zimbabwean financial system, after the country pumped over $6 million worth of the coins since September last year, the Reserve Bank of Zimbabwe (RBZ) said.
With circulation of bond notes – backed by a $200 million Afreximbank facility and pegged at par with the United States dollar (US$) – having begun last year in October, the central bank is quickly approaching its $10 million bond coin ceiling.
In its report for October 2016, the RBZ said the value of coins in circulation had increased from the $9,4 million recorded in September to close October at $9,6 million.
When the coins were introduced in September 2015, $3,5 million were in circulation with the value progressively increasing to $4,4 million in October, $5,7 million November, $7,1 million as at December 2015.
In January 2016, bond coins valued at $7,3 million were in circulation, as the figure came to $7,4 million in February.
At the close of the first quarter in March 2016, bond coins valued at $7,6 million were in circulation while April saw $7,7 million worth of bond coins in the system.
In May, the coins pegged at $8 million found themselves in the system as the figure went up to $8,1 million in June as $8,2 million worth of the coins were recorded for $8,2 million.
The RBZ has said the coins will be maintained below 10 percent of the banking deposits which currently stand at around $5 billion as the 1c, 5c, 10c and 20c coins are part of a five year $50 million bond that government secured to give them value.
Zimbabwe – which ditched its local currency in favour of foreign currencies in January 2009 after hyperinflation reached 500 billion percent – has seen widespread scepticism around the surrogate coins and notes.
Ecuador is another country that uses the greenback as its currency and has special coins, which have the same denomination and value as US coins. Panama also uses the Panamanian balboa, a bond coin equivalent.
In December last year, the central bank announced that the total amount of bond notes in circulation stood at $29 million, following disbursement of an additional $12 million of the parallel currency to the initial bond notes
While central bank governor John Mangudya has said the apex bank remains “encouraged” by the circulation within the domestic economy of bond notes, there have been fears that the central bank’s plan to introduce bond notes to ease the dollar shortage could open the door to rampant money printing.
Overprinting is nothing new to Zimbabwe as it happened in 2008 when inflation hit 500 billion percent, wiping out people’s savings and pensions.
Various international think-tanks have already warned the RBZ not to monetise fiscal deficit on the back of dwindling revenues and economic decline. – Daily News