Zimbabwe announced today that “bond notes” equivalent to the US dollar would be introduced in October, sparking fears of a return to the hyperinflation that wrecked the economy several years ago.
The country, led by authoritarian President Robert Mugabe, adopted the US dollar and South African rand in 2009 after inflation – which peaked at 231 million per cent – rendered the local dollar worthless.
But Zimbabwe has run out of US dollar notes in recent months, and hopes to ease the cash crunch by printing its own “bond notes” that will be valued in denominations of USD 2, USD 5, USD 10 and USD 20.
The plan was widely criticised when it was revealed in May, with analysts saying the token currency would not hold its US dollar value and would be seen as a new version of the valueless local dollar.
“The bond notes will start to circulate by the end of October and will be at par with the US dollar,” Reserve Bank of Zimbabwe governor John Mangudya said in Harare.
“We anticipate by the end of the year USD 75 million will be in the market.”
A wave of protests has shaken Mugabe’s regime this year, with “No to bond notes” among the regular slogans expressing grievances against the government amid a worsening economic crisis.
The cash shortage has forced the government to delay paying salaries each month to civil servants and the military.