The Sunday News
Gabriel Masvora, Business Editor
THE Government has ordered an additional $6 million worth of bond coins as demand soars on the back of increased usage trigged by the rejection of the South African Rand by some businesses.
Finance Minister Patrick Chinamasa announced in his budget statement on Thursday that the new coin order will bring the total number of coins in circulation to almost $20 million as nearly $14 million were in circulation.
“To date, the Bank (Reserve Bank of Zimbabwe) has issued about US$13 567 million worth of bond coins, in various small denominations, and more coins will be provided in line with demand developments. Already, additional coins worth US$6 million have been ordered,” he said.
The demand for bond coins have soared in the past months as the transacting public prefer the coins to the rand.
The demand has been necessitated by the continued fall of the rand to the greenback with the exchange rates now hovering around 1: 14 from around 1:11 at the beginning of the year.
Business and the public are also preferring the coins to deal with the rates distortions which had seen transactions being done using estimated rates resulting in unfairness especially on change. Since the Government introduced the use of coins, prices of most basic goods have also gone down.
“The bond coins have proved popular, and have resulted in the reduction of prices, particularly in the lower end retail sectors,” said Minister Chinamasa
He said so high was the demand for bond coins that some “money vendors” have emerged selling the coins at a rate of $1 for 90 cents of bond coins.
“In order to improve distribution, the Reserve Bank will announce in its Monetary Policy Statement arrangements to broaden the interface to also embrace other bulk customers, to include retailers, transport operators, among others. This will eliminate the current scenario, where the travelling public often resorts to purchase bond coins from street ‘money vendors’. Reports of individuals parting with a dollar to access 90 cents bond coinage have been made.”
The central bank introduced the bond coins on 18 December 2014 in denominations of 1 cent, 5 cents, 10 cents, 25 cents and later 50 cents.
At first the public was skeptical over the use of the coins with some businesses rejecting them but over the year Zimbabweans embraced the coins and are now in turn rejecting other currencies.
Minister Chinamasa also said the central bank through its financial web managed to convert Zimbabwe dollars worth $8,8 million during a demonetisation process that ended in September.
The demonetisation process started in June to compensate non-loan bank accounts as at 31 December 2008 as well as cash held by the public.
Cash holders were allowed to exchange the money at any banking institutions at no questions asked basis while account holders who had zero to Z$175 quadrillion as at 31 December were paid a flat US$5.
Account holders who had balances above Z$175 quadrillion were paid the equivalent value after applying the UN exchange rate of US$1/Z$35 quadrillion or US$1/Z$35 000 (then revalued).
Minister Chinamasa also said consultations for the conversion of Insurance and Pensions Values were underway so that Government can come with conversion rates for the locked pensions.
“Government established a Commission of Inquiry into the conversion of insurance and pension values from the Zimbabwe dollar to the US dollar. The objective is to determine whether there was fairness in the conversion process. Information gathered from the public will be used to determine an appropriate compensation and value entitlement for former and current insurance and pension subscribers. The hearings as well as other submissions, will run from 30 October to 3 December 2015.”
A number of people and pensioners are still reeling from the effects of hyperinflation which wiped out their savings.
Insurance companies have also been struggling to come up with an acceptable exchange rate resulting in a sluggish uptake of insurance products.
Economists said the raft of measures Government was taking to correct the currency issue and align most of its transactions to the US dollar was an indirect admission that Zimbabwe has “unofficially” endorsed the dollar as the official currency.
“If you put together the introduction of bonds, it was meant to fortify the use of the dollar compared to other foreign currency.
Now Government wants to deal with the last remains of the Zim dollar so that the country can officially become a US dollar country,” said an economist with a leading financial house based in Bulawayo.
He added that the move would completely eliminate currency distortions but Government can also officially adopt the use of the dollar.
“On paper we use multi-currencies but we are basically a dollar country. Of course we cannot officially announce the exclusive use of the dollar as this will involve a number of processes in consultation with the primary source of the money which is America. However, clarity can also bring confidence among business. It can even bring back businesses such as Bureau de Change,” he said.
