In November of 2016, Robert Mugabe’s Zimbabwe issued bond notes in an attempt to keep the country’s domestic economy afloat. Mugabe claimed that the value of every bond note would be equal to the dollar.
Following this announcement, Zimbabwe started replacing the Zimbabwean dollars, printing bond notes worth two and five dollars in the domestic market.
It still remains to be seen whether printing bond notes, which have no exchange rate in the international market, is a viable solution for Zimbabwe’s crippled economy.
Prior to November 2016, Zimbabwe operated on many currencies ranging from the Rand( South Africa) to the US dollar. By 2014, they had returned to the Zimbabwean dollar; For one US dollar, they had to exchange 361.9 Zimbabwean dollars, a clear indicator that the country was undergoing a massive economic recession. During this period, they printed billion and trillion dollar notes in their own currency.
After all this, Mugabe’s regime decided to combat the ever-growing economic fluctuations in the open market, printing notes with no exchange rate and claiming they were equivalent to the dollar.
However, there is no simple solution to Zimbabwe’s current crisis. The country has a 95 percent unemployment rate. Nevertheless, Mugabe believes that printing money may be a solution and has even stated that the country’s economy is not fragile, even with 95 percent unemployment. At the World Economic Forum in Durban in 2017, Mugabe said:
“Zimbabwe is one of the most highly developed countries in Africa and after South Africa, I want to know which country has that level of development that we see in Zimbabwe,”
Yet printing bond notes is no solution to the evolving crisis in Zimbabwe. Two months after the change, the new notes, nicknamed “bollars”, are rapidly losing their value.
People have discovered that the “bollars” are not, in fact, convertible into real dollars. This means that they cannot be used to pay for imports—a real problem in a country that does little manufacturing.
For years, Mugabe’s regime has spent more on imports than they made via exports, causing tremendous cash shortages. The Central Bank was forced to limit withdrawals to fifty dollars in 2016.
Although the introduction of “bollars” have solved the immediate concerns of local customers, since shop owners accept this currency, the vendors find it extremely hard to restock their shelves since they need actual convertible currency to buy imports.
Due to these chain-like disturbances affecting payment, a number of shops in Harare, Zimbabwe have resorted to indicating two or three different prices for the same item—a US dollar cash price, a bond-note price and a third price if one pays by card.
Some middlemen are taking advantage of this situation, charging customers premiums of up to 30% to convert these printed currencies to real money.
In all likelihood, Mugabe did not print bond notes to aid a dilapidated economy. I believe that it is merely a political façade on the part of Mugabe, to garner votes for the Zimbabwe General Elections in 2018.