Saturday 9 November 2019

BANKS START ISSUING NEW COINS, NOTES


THE Reserve Bank of Zimbabwe (RBZ) will tomorrow release the new Zimbabwe dollar notes and coins into the market, with depositors set to start withdrawing limited amounts when banks open in the morning.

The new notes come in $2 and $5 denominations while $2 bond coins will also be released into circulation concurrently.

Banks started exchanging part of their electronic balances for the new notes with the RBZ at the weekend ahead of their planned release into the market. Our Harare Bureau understands that the Central Bank will during the course of the week announce new daily and weekly withdrawal limits, which it says will be in line with best international practice. 

Authorities plan to gradually drip feed around $1 billion of cash into the market over the next six months that will take the amount of physical cash in circulation to around 10 percent of total money supply. Zimbabwe has about $19 billion in circulation, with only 4,5 percent being cash.

The RBZ Monetary Policy Committee (MPC) is also set to meet on Friday to assess the market’s reaction to the new notes, and if necessary, prescribe appropriate interventions.

RBZ Governor Dr John Mangudya told our Harare Bureau that release of the new notes will neither be inflationary nor raise money supply.

“Banks will this weekend begin exchanging their RTGS balances for physical cash with the RBZ before they are released to the public on Monday. 

“We will make sure that we drip feed the physical cash into the market in order to ensure that there is sufficient cash in the economy. What we are doing will not increase money supply because we are just substituting existing electronic money with physical cash. The goal here is to create convenience for the transacting public and also offering them a choice of either using electronic money or cash.

“We believe this will also help in eliminating queues at the banks where people spend countless hours of productive time queuing for cash.

“The fears that people are expressing on social media are a legacy of the hyperinflation era, but we rest assure them that there will be no repeat of that because there will be no increase of money supply; there is absolutely nothing to fear.”

Economist and member of the RBZ Monitory Policy Committee, Mr Eddie Cross said concern over inadequate security features, prevented the introduction of higher denomination notes. He said introduction of the new notes would drive down premiums being charged for cash. Premiums of up to 60 percent are being charged for bond notes with coins pegged at 40 percent.

“The primary objective is to bring sufficient cash into the market, to do away with queues at the banks and ATMs and to bring cash into free supply without any premium. The new cash which will be introduced next week (this week) and will be sold to commercial banks on a 1:1 basis for RTGs dollars. There will be no impact on money supply or inflation. We are not creating new money, we are replacing existing money with cash — so it won’t have any impact on the national macro-economic fundamentals.

“If this injection is not enough to solve the problem, we will introduce more currency. The reason for the relatively small notes — the $5 and $2 notes and coins — is because we were concerned about the security features. The security of these notes is not adequate and if we introduce a higher value note there will be counterfeits notes produced.” 

The Central Bank is seeking to eliminate cash shortages, which the country has experienced since 2016 as well as huge premiums being charged for cash. The Zimbabwe dollar was reintroduced in June this year following the outlawing of the multi-currency system. Sunday News

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