Bond Notes have not failed says Reserve Bank Governor

March 5, 2019
Governor John Mangudya | Report Focus News
Governor John Mangudya

Parliamentary hearings are not always the most interesting broadcasts but yesterday’s tense Public Accounts Committee hearing was not only educational but informative.

The Reserve Bank of Zimbabwe Governor Dr John Mangudya elucidated the genesis of the Bond Notes hailing it a success. He articulated how as an export incentive the Bond Note was a success and called on those calling it a failure to do more research on the Bond Notes.

Speaking in response to a question from Dzivaresekwa MP Edwin Mushoriwa who asked Dr Mangudya why he had not resigned after the bond notes had allegedly failed, as he had “promised” to do. Mangudya insisted that bond notes did not fail as an export incentive, but were a major success as evidenced by the rise in foreign currency receipts due to their introduction.
In articulating his position the Reserve Bank Governor said
“For starters people always want to put words in my mouth. What I said and repeat today under oath is, ‘if the bond note, as an export incentive scheme fails to promote exports in this country, I will resign”.

Not to be out done the PAC chairperson Mr Tendai Biti interjected and read a statement attributed to Dr Mangudya, published on September 16, 2016, which reads: “On this matter (bond notes), the buck stops here. We do not want this idea of giving people problems, which I make myself. Give us a chance to do what is right for this economy, to put it back on track.
“If these policy measures fail, if the bond notes do not work out, I’m willing to resign because I am genuine about getting the economy back on track.”
Dr Mangudya retorted, saying; “Mr Chairman, that’s what I am saying, ‘if the bond note fails to do its work, which was to promote exports’ (I will resign)”.
“Mr Chairman, on this one we can disagree because for me it was very simple. The export incentive scheme in this country has worked. “We need to go and call companies that are exporting, and bring them here with me and (say) whether (or not) the incentive scheme failed.

“People do not know the genesis of bond notes. The bond note is monetising the export incentive scheme. The reason why we were giving them 5 to 10 percent was to promote exports.”
Dr Mangudya said many companies increased export receipts, hence the forex that the country has been using to import products such as fuel and raw materials.
Bond notes were introduced on November 28, 2016 but the export incentive was back-dated to May 2016.
In the 2018 Mid-Term Monetary Policy Statement presented on October 2, Dr Mangudya said a combined $743,2 million incentive was paid out to exporters who earned US$12,6 billion in forex.
“I can bring them (exporters) here to this committee, one by one and talk about whether this export incentive has failed. It is in the eyes of people who don’t understand what the purpose for the bond note, why it was put in place.
“We went on a media campaign Mr Chairman, and you say it failed to work, but as far as I am concerned; to have the foreign currency that we have got today, I can mention companies who were not even exporting, that have responded very well. So the answer in simple terms is that bond notes did not fail,” said Dr Mangudya.

Mr Biti then rephrased the question to say the 1:1 value of the US dollar and bond notes failed, to which Dr Mangudya insisted it did not fail.
“Mr Chairman, understand some bit of economics,” said Dr Mangudya, drawing an immediate retort from Mr Biti who said, “I do understood economics”.
Dr Mangudya said there is $437 million worth of bond notes and total banking sector deposits of $10 billion, implying that “what has failed is not bond notes, what happened is that the economy expanded much more than the forex generated”.
“It’s a failure of the economy to generate much foreign currency to maintain its (1:1) parity (due to Government expenditure),” said Dr Mangudya. The session was deferred to next Monday, subject to confirmation by RBZ officials.