'Bond note loses half its value'

'Bond note loses half its value'
Published: 12 September 2017 (859 Views)
The value of bond notes has gone down by more than 50% on the parallel market, showing rising inflation remains on course a local financial research firm has revealed.

Research firm, IH Securities said the high demand for foreign currency required to effect payments for goods and services sourced externally is what has contributed to the bond note depreciation.

"Bond notes have fallen sharply in their value, stirring a wave of massive price increases, especially of basic goods. The high demand for foreign currencies required to effect payments for goods and services sourced externally has seen the value of bond notes declining by as much as 50% of the currency black market," IH Securities said.

"A transfer now attracts a 48% premium, while cash transactions for smaller denominations range between 8% and 9,5% depending on the currency involved. As a result, prices of basic consumer goods have gone up by between 20% and 50%, as companies and retailers pass on the higher costs to the ordinary consumer."

Bond notes were introduced in November under the $200 million export incentive facility guaranteed by the African Export-Import Bank. Its entry into the market has pushed out the dollar from circulation.

The hard currency stock has seen a decline due to lack of foreign investment and sluggish growth in exports.

Companies and retailers have been forced to turn to the parallel market to source cash to expedite foreign payments to suppliers.

Foreign suppliers had threatened to pull the plug on local firms due to delays in making payments. Some suppliers are threatening to cancel credit terms for local businesses.

Some cash dealers told NewsDay that bond note premiums were indeed on the rise, but depended on the method of transaction used.

If a person used real time gross settlement or EcoCash transfers, the premium ranged from 25% to 50%, while for hard cash the range would be between 20% and 30%.

As a result of the high premiums, companies and retailers are forced to recover the costs of the premiums by increasing the prices of basic commodities thus increasing the rate of inflation.

In July, the International Monetary Fund found that, combined with the trade controls, the premiums led to an uptick in inflation, which increased the quarterly annualised inflation rate to 3,4% in March 2017.

Economist Kipson Gundani said the prices of basic commodities were on the rise.

"Yes. There is a price increase. Actually, even the inflation rate is confirming that because we are now in the upper region of 3% officially and according to IMF estimates, by the close of the year they are estimating it will be around 7%. I think that is actually being conservative," he said.

"… you discover that this country is still import-dependent and we import using United States dollars which are being found at that premium on the black market and that premium is being passed on to the final price."

- newsday

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

Mnangagwa's regional trips are strategic, critical and promotes regional integration

by Tinashe Eric Muzamhindo | 19 January 2018 | 76 Views

'Aliens' face challenges in registering to vote in Zimbabwe

by Stephen Jakes | 19 January 2018 | 54 Views

Roy Bennett 'suffered a lot in his attempt to build a new Zimbabwe'

by Staff reporter | 19 January 2018 | 73 Views

Who is the Representative of God on Earth?

by Tendai Tagarira | 19 January 2018 | 61 Views

Champions at home and abroad gone too soon

by Jacob Mafume | 19 January 2018 | 56 Views

Former deputy minister of education 'Tapela' dies

by Stephen Jakes | 19 January 2018 | 111 Views

WATCH: Mugabe 'forgot' Mnangagwa firing

by BBc | 19 January 2018 | 123 Views

Obert Gutu banned from MDC-T HQ by the Vanguard

by Staff reporter | 19 January 2018 | 101 Views

Mnangagwa's message to Davos

by Staff reporter | 19 January 2018 | 63 Views

MDC must lead by example in leadership transfer - Mliswa

by Stephen Jakes | 19 January 2018 | 82 Views

Heal Zimbabwe riled by increase in human rights violations

by Stephen Jakes | 19 January 2018 | 50 Views

Free and fair elections is a myth

by Zondiwe Gumede | 19 January 2018 | 68 Views

Why women keep out of political participation and activism in Zimbabwe

by Makho Precious Moyo | 19 January 2018 | 59 Views

About Marriage (Part 1)

by Belinda Chowa | 19 January 2018 | 80 Views

MDC must urgently put its house in order

by Justice Benjamin Paradza | 19 January 2018 | 73 Views

MDC mourns the passing of the struggle veteran Roy Bennett

by Stephen Jakes | 19 January 2018 | 127 Views

MDC-T provincial chairpersons exonerate Khupe

by Tererai Danga | 19 January 2018 | 123 Views

Gukurahundi is not a bygone - Zapu

by Stephen Jakes | 19 January 2018 | 92 Views

'Arrest Obert Mpofu or else chaos will reign'

by Staff reporter | 19 January 2018 | 395 Views

Mnangagwa felt sorry for Grace Mugabe

by Staff reporter | 19 January 2018 | 286 Views

Axed Bosso players demand outstanding dues

by Staff reporter | 19 January 2018 | 89 Views

Varsity student shoplifts perfumes

by Staff reporter | 19 January 2018 | 138 Views

Stealing from the dead

by Staff reporter | 19 January 2018 | 93 Views

Bulawayo's Luthuli Dlamini takes City to the world

by Staff reporter | 19 January 2018 | 83 Views

Sex with late uncle's wife torments man

by Staff reporter | 19 January 2018 | 162 Views

Lying ben 10 dumped

by Staff reporter | 19 January 2018 | 101 Views

Mudzingwa opens up on Bosso exit

by Staff reporter | 19 January 2018 | 78 Views

Teacher forces 'lover' pupil to abort

by Staff reporter | 19 January 2018 | 78 Views

Man dumps wife for married girlfriend

by Staff reporter | 19 January 2018 | 130 Views

Baboon attack splits family

by Staff reporter | 19 January 2018 | 80 Views

R10 stabbing sends man to ICU

by Staff reporter | 19 January 2018 | 51 Views

Knives drawn as pastors fight in church

by Staff reporter | 19 January 2018 | 93 Views

Typhoid case in Nkayi linked to Mbare

by Staff reporter | 19 January 2018 | 55 Views

Woman feasts on own blood

by Staff reporter | 19 January 2018 | 65 Views