Mthuli Ncube Against Scraping The Bond Note As His Eyes Open Up To Grim Economic Reality
MDC MP and House of Assembly representative for Harare East Constituency, Tendai Biti said that Minister of Finance Mthuli Ncube failed to specify the currency in which the national budget is predicated upon.
Even though the government’s [osition is that the value of the US dollar vis a vis that of the bond note/RTGS is 1:1, the reality is that the currencies are not at par.
While contributing to the debate on the 2019 budget in Parliament, Biti said
There’s a challenge relating to the budget’s failure to identify the exchange rate in which it is predicated upon. This is the failure of the budget to identify the currency in which it is expressed. To maintain the fiction of a US$1:1 bond makes this budget fail even before it has started.
The reality out there is that we are existing in a period of serious structural exchange distortion. We are existing in a period of a multi-tier pricing system; there is a price in US dollars, bond notes, and RTGS. The growing exchange rate in the past two months has been a rate of US$1:3.50 bond. In other words, to purchase US$100 you require $350 of the local currency, whether it is bond notes or RTGS. So, we cannot run away from that reality.
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In response, Ncube confessed that scraping the bond note would be costly. Ncube had this to say
If you consider those to be fundamentals of currency which they are, just by dealing with fiscal discipline and the current account deficit, we are making sure that we strengthen the fundamentals of our monetary sector.
It’s therefore not surprising that in the market in which some of the people operate, the so-called parallel market, those rates have stabilised. The premium has stabilised.
There were comments on that we should demonitise the bond note. I want to be clear that it costs money – US dollars – to demonitise the bond note. There’s a figure that we’re aware of in terms of what it will cost, so, that figure will have to be sourced from elsewhere to demonitise it.
… Even if you want to replace it with the rand, which is a suggestion that I heard, it will cost you US dollars to change the bond note into the rand. I want to be very clear about that. It is a costly exercise and it would need to be budgeted for.