Tuesday, 16 June 2020

INTRODUCTION OF $20 NOTE DELAYED : MTHULI NCUBE

TREASURY is taking caution not to upset the market through increased money supply by delaying the introduction of the $20 note and other higher denominations.


Following the introduction of the $10 note at the end of May, the Reserve Bank of Zimbabwe (RBZ) had initially announced that the $20 note would be in circulation by the first week of June.

However, despite helping ease cash shortages and enhancing consumer convenience in the market, the move has been followed by a wild exchange rate spiral against the local dollar, which now trades at 1:60 and above against the US$1 on the parallel market at a time when the fixed exchange rate remains at 1:25. The trend has worsened pricing distortions and further weakened consumer spending.

This is happening at a time when earnings for workers have remained stagnant amid limited business activity with employers also feeling the pinch in view of the adverse impact of Covid-19. 

In a recent interview, Finance and Economic Development Minister, Professor Mthuli Ncube, said Government was cognisant of the prevailing manipulation of the market and the exchange rate, stating that concrete measures were being put in place to stem the tide and ease the burden on ordinary citizens. “At the moment we have allowed citizens to use free funds (forex), as a way to also manage growth of money supply.

“So, we said we will bring it ($20 note) but we need to ease pressure and we want to manage the introduction of whatever currency we have so that again we don’t balloon growth of money supply,” he said.

“We use the swapping mechanism where we are swapping RTGS balances for cash and we have kept that approach and that’s the right approach to do it,” said Prof Ncube.

He said Treasury through the Central Bank was determined to clamp down on currency speculation tendencies on the market, which have been blamed for parallel market distortions. “We said at the beginning of the year that one of our challenges is going to be exchange rate stabilisation and we are working on it. We are dealing with those in the speculation business in the parallel market,” said Prof Ncube. 

He said the RBZ had taken measures to deal with deviants in terms of the law and in regulating the mobile platforms in transmitting money.

Prof Ncube said tackling the tide of speculation was critical in restoring currency stability and exchange rate challenge. He also said Treasury was keeping its focus in taming budgetary deficits, which have a huge bearing on currency stability.

“On the fiscal front, we are determined to make sure that we don’t run large budget deficits, which become a problem for currency stabilisation. But also on the monetary front, we make sure money supply growth stays within the limits to ensure it doesn’t add again to currency volatility,” said Prof Ncube. Chronicle

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