Zimbabwe announced on Thursday that “bond notes” equivalent to the US dollar would be introduced in October, sparking fears of a return to the hyperinflation that wrecked the economy several years ago.
The country adopted the US dollar and South African rand in 2009 after inflation — which peaked at 231-million percent — rendered the local dollar worthless.
But Zimbabwe has run out of US dollar notes in recent months and hopes to ease the cash crunch by printing its own “bond notes” that will be valued in denominations of $2, $5, $10 and $20.
The plan has attracted criticism, with analysts saying the token currency will not hold its US dollar value and will be seen as a new version of the valueless local dollar.
A wave of protests has shaken Mugabe’s regime this year, with “No to bond notes” among the regular slogans expressing grievances against the government amid a worsening economic crisis.
“The bond notes will start to circulate by the end of October and will be at par with the US dollar,” Reserve Bank of Zimbabwe governor John Mangudya said in Harare.
“We anticipate by the end of the year $7- million will be in the market.”
The cash shortage has forced the government to delay paying monthly salaries to civil servants and the military.
With the government again able to produce its own money, many Zimbabweans fear a repeat of the excessive printing that led to hyperinflation.
“It will immediately destroy trust. The trust is not there and the value of the bond note will not be sustained,” Harare-based economist analyst John Robertson told AFP.
“There is no money because there is no new investment. There is no investment because there is no trust — and you can’t fix that by printing more notes.”
Zimbabwe once removed 12 zeros from its battered currency, at the height of hyper-inflation in 2009, when the largest note was the $100-trillion denomination.
The new bond notes will be printed in Germany and backed by a $200-million support facility provided by Afreximbank (Africa Export-Import Bank), the government has said.
Further anti-Mugabe protests are planned on Saturday, despite a police ban on rallies in Harare.
Mugabe, 92, has often used brutal force to silence his opponents, and he warned the protesters they were “playing a dangerous game”.
Last week, the government revealed that nearly 97 percent of its revenue goes to paying public workers’ salaries.
Bond coins valued in US cents were introduced in Zimbabwe in 2014 to tackle the problem of small change.