President Robert Mugabe has gazetted Statutory Instrument 133 of 2016, which provides a legal framework for the introduction of bond notes as acceptable legal tender in Zimbabwe. SI 133 of 2016, Presidential Powers (Temporary Measures) Amendment of the Reserve Bank of Zimbabwe Act, empowers the central bank to issue out bond notes using its preferred design, form and material.
Section 44B of the amendment reads:
“The Minister may by notice in a Statutory Instrument prescribe that a tender of payment of bond notes and coins issued by the Bank that are exchangeable at par value with any specified currency other than Zimbabwean currency prescribed as legal tender for the purposes of section 44A, shall be legal tender in all transactions in Zimbabwe to the same extent as that prescribed currency.”
In terms of the statutory instrument, RBZ will determine how the bond notes and coins will look like.
“There hereby issued by the Minister in terms of section 44B (1) of the principal Act as inserted by these regulations bond notes in such units as shall be specified by the Bank and whose design, form and material shall be determined by the Bank and notified to the public.”
The Statutory Instrument, for the avoidance of doubt, also covers bond coins that are already in circulation.
“The issuance of the bond notes referred to in the following subsections; and the bond coins in circulation before the promulgation of these regulations, shall be deemed to have been prescribed by the Minister in terms of Section 44A (1) of the principal Act as inserted by these regulations.”
Finance and Economic Development Minister Patrick Chinamasa said SI 133 of 2016 gave the RBZ power to introduce bond notes and coins with a 1:1 rate against the United States dollar.
He said creditors were compelled to accept payment in bond notes. “If one owes you money in United States dollars, you must accept payment in bond notes. You cannot refuse. “One would have discharged his or her obligation to you,” he said.
In a statement issued yesterday evening, Minister Chinamasa said RBZ would now go ahead to introduce the bond notes without any hindrances.
“The Reserve Bank of Zimbabwe will with immediate effect start the process towards issuance of bond notes as a legal tender in Zimbabwe. The process will commence with media publicity to inform and raise awareness of the public on the denominations, design, form, material and security features which are used in the bond notes to be introduced.
“This is to ensure that the public is not duped by fake bond notes that may be circulated into the market by unscrupulous elements in our society,” reads the statement. Minister Chinamasa said the President Mugabe promulgated the law as critical economic recovery measure.
“Given the criticality of the issuance of bond notes as legal tender to the recovery of our economy and also the controversy that has surrounded the subject matter, it has been decided that the legality of bond notes as legal tender in Zimbabwe should be put beyond any measure of doubt. It is to this effect that the President has today gazetted Statutory Instrument 133 of 2016, Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Bond Notes) Regulations, 2016. The measures that have been gazetted under Presidential Powers Regulations will fortify and underpin the existing legal framework for the issuance of bond notes,” he said.
When the Reserve Bank of Zimbabwe is satisfied that the public is sufficiently conversant with the salient features of the bond notes, it will proceed to issue them in line with the Export Incentive Scheme.
The central bank, Minister Chinamasa said, had recommended the Export Incentive Scheme in terms of Section 49 of the Reserve Bank of Zimbabwe Act (Chapter 22:15) to boost the country’s reserves through increased export earnings.
He said the Export Incentive Scheme would therefore remedy the decline of reserves, which had a negative impact on the country’s ability to make prompt settlements of its international obligations.
Minister Chinamasa said under existing legislation the Reserve Bank of Zimbabwe had power to issue bond notes in terms of the provisions of Section 7 of the Reserve Bank of Zimbabwe Act Chapter (22:15).
The bond notes, which are guaranteed by a $200 million African Export Import Bank (Afrexim) loan facility, will be at par with the US dollar. Bond notes will be first introduced in $2 and $5 denominations before gradually rolling out the $10 and $20 notes. The first phase of the bond notes introduction will see $75 million being released by end of December this year.