Zimbabwe's 2014 Bond Coins

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Zimbabwe's 2014 Bond Coins
Zimbabwe Bond Coins
Bond-coins.jpeg
Bond Coins
Central bank Reserve Bank of Zimbabwe
 Website www.rbz.co.zw
Date of introduction 1 December 2014
 Source 1 December 2014
User(s) Zimbabwe
Subunit
Nickname Bond Coins, Zim Dollar

Bond coins are a currency of coins backed by a bond that were introduced by the Reserve Bank of Zimbabwe (RBZ) in December 2014 and in March 2015 respectively with the aim of easing transaction change problems.[1]

The bond coins were denominated in 1 cent, 5 cents, 10 cents and 25 cents. The coins were brought into circulation through the local banks. The coins were minted in South Africa. At the time of introduction, the coins were equivalent to the value of US cents.[1]

The total value of the coins introduced was US $10 million backed by a $50 million dollar denominated bond translated to 2% of the total bank deposits in the country.[1]

100% dollarisation a mistake

At the unveiling of the coins, the RBZ governor John Mangudya said that Zimbabwe made the mistake of going 100 percent dollarization without leaving room for small change, hence the introduction of the bond coins was aimed at addressing the small change gap.[2]

The Bond Coins Specimen

Initial Skepticism

The introduction of the Bond coins was widely believed to be a gradual introduction of the Zimbabwe's own currency which was abandoned 2009 after a decade of hyperinflation, in favour of a multi-currency regime dominated by the US dollar and South African Rand. Mangudya however denied this was the introduction of the local currency in disguise, saying such a move would be "economic suicide".[1] The governor said it would take about 4 to 5 years for the local currency to be reintroduced.[2] There were also underlying fears that the new set of coins would face stiff resistance from the public and informal traders who were unsure of the government's intentions.[3] The government went on to launch the coins regardless of some of the concerns that had been raised.

Rejection and Supply Shortage

It was reported soon after the release of the coins on the market that street vendors, commuter bus operators (kombis), and fuel service stations were rejecting the coins, insisting that their customers use US dollars to settle for goods and services. There was still widespread skepticism that the introduction of the bond coins is a precursor to the introduction of the Zimbabwean dollar.[4] Circulation of the coins seemed to have been confined to major retail shops such as OK Zimbabwe. While service providers such as Kombi operators were fingered as the chief culprits in preventing the circulation of the coins by rejecting them as legal tender.

In addition to the rejection, a shortage of the Bond Coins was experienced and many shoppers who requested bond coins found the shops without any and were still offered change as sweets and South African Rands. Mangudya explained that banks had under-ordered the coins and that they were working with them to ensure there was enough supply of the coins. By January 3, 2015, only US $2.5 million of the US $10 million worth of bond coins available had been channeled to the banks. Mangudya also said that shops needed to adjust the prices from the traditional 50 cents and $1 to variable amounts like 75 cents since the bond coins allowed them to do this.[4]

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Eventually Acceptance

Eventually, in 2015, the Bond Coins were preferred as a currency to South African rands as the SA economy weakened. By 2016, the Bond Coins were accepted in virtually all transactions from the very formal (in supermarkets) to the streets.

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References

  1. 1.0 1.1 1.2 1.3 Golden Sibanda, RBZ introduces coins, The Herald, Published:6 December 2014, Retrieved:6 December 2014
  2. 2.0 2.1 Africa Economy: Zimbabwe central bank unveils new bond coins, Africa Xinhuanet, Published:5 Dec 2014, Retrieved:6 Dec 2014
  3. ‘Bond coins to face stiff resistance’, NewsDay, Published: December 17, 2014, Retrieved: December 18, 2014
  4. 4.0 4.1 BUSINESS: TEETHING PROBLEMS FOR BOND COINS, Ignorance breeding scepticism, The Sunday Mail, Retrieved:4 Jan 2015, Published:4 Jan 2015