IMF says Mugabe’s “bond note” surrogate currency will not solve Zimbabwe’s economic problems

A currency dealer counts wads of bond notes outside a bank in Harare, Zimbabwe,February 24, 2017. REUTERS/Philimon Bulawayo/File Photo

HARARE  – Zimbabwe’s “bond note” surrogate currency will not solve its economic problems, the International Monetary Fund said, adding that only comprehensive reforms would address a fiscal crisis.

The southern African nation last year introduced bond notes, which officially trade at par with the U.S. dollar and are backed by a $200 million bond from the African Export and Import Bank.

The director of the IMF’s Africa department, Abebe Aemro Selassie, told reporters in Washington on Sunday that limited foreign exchange inflows and a lack of monetary policy tools since Zimbabwe’s adoption of the U.S. dollar in 2009 had worsened cash shortages.

“We think that, going down this one (bond) note route, in and of itself, will not address the challenges that the country has,” Selassie said, according to a transcript of the media briefing.

“So, it’s very important to have a more comprehensive policy package which also addresses a lot of the fiscal challenges that the country faces, a lot of the structural reforms that have to be done.”

The central bank says it has so far printed $121 million in bond notes but a high demand for cash has meant that the surrogate currency is also in short supply.

Importers, including mining companies and manufacturers, say they are facing serious delays in paying for imports because banks have no dollars to make the payments.

“So, it’s, again, more of a holistic package of reforms that are required to get Zimbabwe out of the place it’s in right now,” Selassie said.

(Reporting by MacDonald Dzirutwe; Editing by Olivia Kumwenda-Mtambo and Andrew Roche)

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