* Raises fears of a return to local currency, hyperinflation
* Meant to address cash shortages, but more protests planned
* Central bank says not re-introducing local currency
By MacDonald Dzirutwe
HARARE, Sept 15 Zimbabwe will introduce local
bank notes, known as "bond notes", at the end of October, the
central bank governor said on Thursday, raising fears of a
return to a domestic currency abandoned in 2009 as
hyperinflation soared out of control.
Zimbabwe is in the throes of its worst financial crisis
since it switched its currency for the U.S. dollar, and the new
notes in small dollar denominations are meant to help address
cash shortages that have fueled protests against the government.
Reserve Bank of Zimbabwe governor John Mangudya said during
a monetary policy statement, the equivalent of $75 million in
the notes would be circulated by year-end, adding the bank was
"very far" from re-introducing a local currency.
He sought to allay concerns of a return to rampant money
printing and inflation rates that peaked at 500 billion percent,
by saying that the notes would account for less than one
percent of the $6 billion held in bank deposits.
An independent body would also monitor the printing and
circulation of the $2 and $5 denominations to make sure things
did not get out of control, he added.
"It's about trust and confidence and we are saying if you
don't want them (bond notes), don't take them. We won't
overprint the bond notes," Mangudya said.
But activist leaders said the scheme would not answer their
concerns and promised more rallies against economic hardships
and the man they blame - 93-year-old President Robert Mugabe.
"They (the bond notes) are not acceptable. It's a way of
trying to steal our money. Our action on the ground will
demonstrate our resolve to stop that madness," said Promise
Mkwananzi, the leader of the #Tajamuka protest movement.
Memories are still fresh of the hyperinflation considered by
the International Monetary Fund as the worst for any country not
The crisis led to the release of the 100 trillion dollar
Zimbabwean dollar note - the single largest known bill to be
printed by any central bank. Shoppers carried stacks of money in
plastic bags as prices changed several times daily.
The introduction of the U.S. dollar as the official currency
halted the sky-high and accelerating inflation.
Mugabe did not release a statement on Thursday, but has
called bond notes a "surrogate currency" that would prevent
foreigners taking greenbacks out of the country and improve
An executive at a Harare commercial bank said most people
wanting to withdraw cash would eventually get bond notes.
"Most people still withdraw cash and because it is scarce,
it is most likely that you will be given bond notes at your bank
and it stops being an option," said the executive.
Mangudya said Zimbabwe had imported $250 million cash
between May and September. He also said the central bank had
agreed with banks to cap interest rates at 15 percent.
(Editing by Andrew Heavens)