Bond Note Did Not Lose Value, Inflation Increased- Mangudya

In an interview with Zimbabwe Independent Senior reporter Tinashe Kairiza (TK) central bank governor John Mangudya denied the bond note did not lose value against the US dollar.

He said it was not the bond note that lost value but inflation rates went up in October last year. He also denied the bond note failed. Below is an excerpt of the interview:

TK: At inception, the bond note was supported by various Afreximbank facilities in excess of US$300 million. However, the local unit was gradually losing value against the US dollar. What eroded the value of those support facilities?

JM: That is not true. What happened is that the fundamentals of the economy were changing significantly in October. Let us just call a spade a spade. The parallel exchange rate in June was at a premium of $1 200 to $1 800 during the year 2018 up to September. Therefore, the bond did not lose much ground at that rate. Fast forward to October, the fundamentals changed, inflation went up by 5%. All these incentives were higher than inflation, so it means it was a real incentive. Inflation went up to 20% in October, now 42%. It is not the bond note which has lost value; it is inflation which has gone up. We can no longer sustain that anymore. We now want to fix the inflation. Fix the rate. Stabilise the exchange rate.

More: Independent