Bond Notes and The Panic Buyer Rates Explained

The bond notes celebrate a year in circulation. It has baffled the finance markets by not only competing with the USA dollar but proving its opponents wrong.The bond notes have a different effect on different markets. These markets and effects are often confused. This confusion l hope to clear below, l have split the markets into four.

I have also provided the rates for each market and the causes for the different rates.

THE BLACK MARKET 

I would like to define the black market and draw a clear line between it and the informal market. The former is illegal and the latter is legal.

The black market is where there are different rates on transactions. The nature of black market calls for different rates depending on the illegality of the transaction and the desperation and vulnerability of the parties to a particular transaction.

The rate can vary from 6% to 100%.

THE INFORMAL MARKET 

The informal market before the introduction of the bond notes was operating on a strict cash basis.The USA dollar was the medium for all transactions.

The informal market transactions are still on a strict cash basis, that is why we do not see swipe machines at Mbare or Sakubva market.
Here the dollar and the bond notes will trade at par. It is still one as to one.

THE FORMAL MARKET

 
The formal market is the least likely place for the bond note or any other currencies manipulation. It is the perfect market, as the economist likes to say.

The rates on all fronts are the same and only a business which acts unethically will be able to manipulate the rate.
In the formal market, a business that acts unethically is bound to be punished by the people through market forces and it is also bound to break some laws and will face appropriate legal sanctions.

THE FOREIGN EXCHANGE MARKET 

This market from my on observation is the most difficult to be able to distinguish it from the three markets above. The difficulty arises because the bond note is both an internal and external holder of value.

This problem is further made more complex by the fungibility of the bond notes going beyond our borders. The bond notes are an acceptable currency for business transactions in our neighbour states.

It is the most difficult market as all three of the above makes up this market. This makes the foreign exchange rate for the bond note to fluctuate between 6% and 30%. This rate depends on the availability or to be more accurate,  the supply of the bond notes on the market.

MY PARTING SHOT

I am a proponent of the bond notes and from my observations, the bond notes have had a positive impact on our financial system. I believe the Reserve Bank of Zimbabwe has worked around the financial sanctions against Zimbabwe.

It is the enemies of Zimbabwe who were calling bond notes a failure before their introduction. These people like the fake born - again brothel runner, the fake pastor for hire and the professional paid political agitators cannot discount the positive effect the bond notes have had on our economy.