Concerns have been rising in Zimbabwe as it emerged that the nation's reserve bank is rolling out "bond notes", a form of domestic currency being introduced by President Robert Mugabe's government on Monday (31 October).
Mugabe has come under pressure over how his government has handled the economy as the nation faces its worst financial crisis in seven years compounded by acute cash shortages and soaring basic food prices.
Is Zimbabwe running out of cash?
In 2009, Zimbabwe stopped printing its own currency to end hyperinflation, after paper money became worthless.
Instead, it started using a basket of currencies for daily transactions. Zimbabweans now use US dollars, South African rand, the Chinese yuan and British pounds.
However, a fall in commodity prices and a severe drought in the past few months have weighed on exports. This means Zimbabwe is earning fewer dollars abroad.
This shortage of dollars – by far the most widely used currency now – has led to queues forming at some banks and ATMs in recent months, and the government has been trying to encourage people to move away from the dollar to the rand as South Africa is one of its most prominent trading partners.
The issue of bond notes emerged in June this year after the government announced that it wanted to help deal with the shortage of US dollar, the dominant currency, that the import-dependent nation was already facing at the time. Zimbabwe abandoned its currency in 2009 following hyperinflation, adopting a multi-currency system dominated by the dollar.
Hyperinflation fears amid crisis
Zimbabwe reserve bank, which has begun its awareness campaigns, will distribute the controversial surrogate currency, which are guaranteed by a $200m loan facility and will be at par with the US dollar, from Monday (31 October).
The introduction of this new currency has fuelled fears the country could fall back to the hyperinflation lows of 2007/2009 when the nation's banknotes became worthless, Zimbabweans lost all their savings and poverty skyrocketed.
Moody's Investors Service last week warned Zimbabwe's economy "faces growing cash and liquidity challenges", and highlighted a potential "risk to the domestic banking sector". "Although the bond notes are intended to ease the cash shortage, there are concerns in Zimbabwe that they represent the first step towards the return of a domestic currency. This has exacerbated net deposit withdrawals and cash hoarding," the credit rating agency said in a report on 28 October.
Opposition politicians have also rejected the measure, with former vice-president and current leader of the opposition party Zimbabwe People First (ZimPF) Joice Mujuru approaching Zimbabwe's highest court in a bid to stop Mugabe from introducing the new currency.
In her application, Mujuru claims three of her fundamental rights enshrined in the constitution – including her contractual freedoms – would be violated if the government went ahead with the bond notes launch.
These concerns have been shared on social media, with users taking to Twitter to voice their qualms.
User Morris Gavhure said in a Tweet: "The RBZ [Zimbabwe Reserve Bank] needs to make the nation aware and do whatever it takes to dismantle the psychological inflation attached to the bond notes." Another user, music producer Khulekani Bethule added: "Bond notes coming in this or next week...will they ease the cash shortages or they will take us back to the year 2007/8?"