Zimbabwe introduces new 'bond note' as cash shortages bite

A man holds a two dollar Zimbabwean 'bond note' withdrawn in Harare, Zimbabwe on November 28, 2016.
Wilfred Kajese | AFP | Getty Images

Zimbabwe has started circulating a $5 "bond note", the central bank said on Friday, as President Robert Mugabe's government struggles with a cash crunch that has forced people to spend hours at banks queuing for money.

The southern African nation introduced a $2 note and $1 coin last November to ease the cash shortages. Despite warnings that it could eventually cause hyperinflation, the "bond note" currency is still trading at par with the U.S. dollar.

The Reserve Bank of Zimbabwe (RBZ) on Thursday released the purple $5 note to banks, its governor John Mangudya said. He said $15 million of the new notes had been released, bringing the total amount of bond notes in circulation to $88 million.

Zimbabwe abandoned its own hyperinflation-hit currency in 2009 in favour of the U.S. dollar, but a widening trade deficit, lack of foreign investment and a decline in remittances by Zimbabweans abroad have helped to fuel foreign currency shortages.

Some businesses, especially those importing goods, are now offering discounts on cash purchases in U.S. dollars, while charging more for mobile or card transactions.

Importers defend the practice, saying they are struggling to pay for goods abroad because accounts held by local banks overseas have been depleted of foreign currency.

Some banks have also drastically cut daily online purchases and cash withdrawals for foreign travellers from $1000 a day to as little as $50.

Follow CNBC International on Twitter and Facebook.