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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