Zimbabwe will print its own version of the U.S. dollar, as an ailing economy fuels a severe cash shortage in the southern African nation. John Mangudya, Zimbabwe’s central bank governor, said Thursday the so-called bond notes will be backed by $200 million in support from the Africa Export-Import Bank, according to the Herald, a local government-owned newspaper.
“It is not an overnight process,” Mangudya told the Herald when asked what date the bond notes will be issued. “We are still working on a design which will be sent for printing outside the country. The notes will not be introduced immediately but probably within the next two months.”
The specially designed dollar notes will come in denominations of two, five, 10 and 20. They will also have the same value as their U.S. dollar equivalents. The bond notes are an extension of so-called bond coins of one, five, 10 and 25 cents which the central bank introduced in 2014 and are pegged to the value of the U.S. dollar.
The central bank governor stressed the introduction of the bond notes does not signal the return of the defunct Zimbabwean dollar, which the country ditched in 2009 amid sustained hyperinflation. Residents have since been using the U.S. dollar as well as several other foreign currencies, including the South African rand and the Chinese yuan. To curb the U.S. dollar shortage, Mangudya also set a $1,000 limit on how much cash can be taken out of the country and encouraged residents to use the rand since South Africa is Zimbabwe’s top trading partner, BBC News reported.
The rand, however, has suffered from the brunt of a general sell-off in riskier assets amid fears of a global economic slowdown at a time when South Africa’s own economy is also struggling to grow. Ratings agencies have threatened possible downgrades should the South African government show a lack of commitment to cutting its budget deficit, Reuters reported.
The situation has made Zimbabweans reluctant to hold on to rand notes because they are worried the currency won’t maintain its value against the U.S. dollar. As Zimbabwe faces deepening economic woes after drought weakened vital agricultural production and disrupted hydro power generation, cash-strapped residents are lining up outside banks in the capital to get dollars to pay for everything from groceries to school fees.
“Unless the country takes bold reforms, the economic difficulties will continue in [the] medium term,” the International Monetary Fund said in a report Wednesday, after the most recent consultation with Zimbabwean officials. “Given the outlook for the global economy, growth is projected to remain below levels needed to ensure sustainable development and poverty reduction.”