What are bond notes and why are Zimbabweans protesting against them?

Thousands of people were expected to take the streets in Zimbabwe's main cities against the imminent introduction of bond notes, a form of domestic currency being introduced by President Robert Mugabe's government. As crowds gathered for the #NoToBondNotes and #RejectBondNotes march in the capital Harare on 3 August saying they would resist the bond notes issuance, IBTimes UK looks at why their launch is facing so much criticism, almost seven years after the nation abandoned its currency and adopted nine foreign currencies.

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.

The government blamed the cash shortage on the large number of people coming into Zimbabwe from the region and swooping the cash - saying the south African nation had become like an ATM machine for the region, and that it was losing money.

Zimbabwean citizens fear 'being left with nothing'

Zimbabwean lawyer Alex Magaisa, a former adviser to ex-prime minister Morgan Tsvangirai, believes that, in reality, the government purely ran out of cash and "has been using money which is held in customers' (bank) accounts and taking money from the banks and the banks have been unable to pay customers as is required by their contract".

Essentially, the lawyer explained, the bond note issuance is "a desperate response by the government to its own inability to live within its means". While the government hopes to address the dollar shortage by printing currency notes, Zimbabweans remain very averse to any local currency at this moment in time as they are still traumatised by the 2008 hyper-inflationary era.

"They have traumatic memories of the Zimbabwe dollar in 2007-2008 when the country was printing money and had mega hyperinflation (...) They fear that this will leave them without anything," Magaisa told IBTimes UK in an exclusive interview.

Fears the new currency may effectively make money worthless come amid a crumbling economy, import bans on goods and the government's failure to pay civil servants.

Minister 'must use bond notes himself in the toilet'

In the past, Zimbabweans would simply have complained behind their office walls and homes, but because of the worsening economic situation and the threat that the bond notes pose to their livelihoods, citizens have decided to rise and show the government their discontent.

One of the groups behind the mass demonstrations, the Crisis in Zimbabwe Coalition, said on Facebook: "We don't want to go back to the suffering of 2008 where shops were empty because paper money from the State's printing machines was worthless! We're not afraid to demonstrate because we know that bond notes will definitely kill us all so we need to stop that madness now now."

Citizen movement #Tajamuka has said it would resist the bond notes which it described as "bond paper, which is not money". A member of the campaign, Silvanos Bhanditi Mudzvova, said in a recorded video that demonstrators would march to the Ministry of Finance "and tell (Minister of Finance) Patrick Chinamasa's office that we reject his bond tissues (...) He must use them himself in the toilet."

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.

Will Zimbabwe's government go ahead?

What remains to be seen, meanwhile, is whether the Minister of Finance, and Reserve Bank of Zimbabwe Governor John Mangudya, will continue nonetheless. While they had initially proposed to introduce these bond notes in June, they eventually backtracked saying they would introduce them in August, and later again in October.

"It remains to be seen whether they will actually introduce them in October or if they delay it again. I think they realise that the concerns the people have are legitimate and that the plan might not succeed," Magaisa explained, adding the regime is desperate to reopen credit lines with international lenders such as the Bretton Woods Institutions.

Mid-June, Chinamasa insisted Zimbabwe would clear the $1.8bn of arrears it owes the Bretton Woods Institutions when the government is able to access fresh financing from the three lenders; and negotiations are underway.

Bretton Woods Institutions − including the World Bank, the International Monetary Fund (IMF) and African Development Bank (ADB) − froze their financial assistance to Zimbabwe in 1999 when the nation defaulted, and rendered it unable to clear a $1.8bn (£1.36bn) debt it owes the institutions. Western governments also imposed sanctions on Harare in 2001 over allegations of vote-rigging and human rights abuses.

According to the lawyer, Chinamasa and Mangudya may be hoping for support that they might get from the IMF. "When they spoke about bond notes they probably thought the IMF package would come sooner and then realised that it wouldn't so that may be a reason why they kept delaying, " Magaisa explained. "But if the IMF gives them the go-ahead on the package they need, they will bring the bond notes. However, I suspect they will be delayed again."

Despite public resistance, the central bank on 2 August claimed it was "well on track" to launch the bond notes in October. "October is still the introduction date... the process is not just printing, it also involves design, so we are well on track," deputy governor Kupukile Mlambo told the Daily News.