THE Reserve Bank of Zimbabwe (RBZ) will in the next few
weeks introduce a new set of higher denomination banknotes to increase physical
money supply and curb cash shortages.
Authorities have approved the introduction of $10 and $20
banknotes worth close to $600 million.
The money will be drip-fed into circulation beginning this
quarter.
Currently, around $1,4 billion in cash is circulating. The
new notes are expected to take the total to $2 billion.
Designs for the new denominations have already been
approved, while printing is underway.
Zimbabwe has $2 and $5 notes and coins, which make cash
transactions cumbersome, with small transactions now requiring huge wads of notes
and coins due to inflation.
Cash shortages have triggered long queues at banks and an
illegal market where premiums of up to 40 percent are charged to convert
electronic money into cash.
In addition, cash shortages have led to the creation of a
multi-tier pricing system, where prices of a single product differ depending on
the customer’s mode of payment.
Authorities believe the new notes will enhance convenience
to the transacting public and eliminate the illegal cash market.
Printing smaller denominations was also proving costly for
Treasury.
A member of the RBZ Monetary Policy Committee, Mr Eddie
Cross, told The Sunday Mail that an announcement of the new notes was imminent.
“The plans are advanced and higher denomination notes will
be made available to the public sometime later this month,” said Mr Cross.
“The Reserve Bank will make the announcement. They (the
notes) are being printed and the appropriate date will be announced soon.
“We had a meeting yesterday of the MPC and the Governor
confirmed to us that the rollout will be in stages so it won’t be a full range
of notes initially, but it will only be higher denomination notes.”
He said banks will be required to exchange their electronic
balances for physical cash to ensure that no new money is created.
“We are moving cautiously because we don’t want to disturb
the monetary balance and we are insisting that banks pay for the currency when
they draw it so that there is no money creation,” he said.
“We are now taking steps to start implementing that. We
started in September last year when we had about $500 million worth of notes in
circulation and now we have between $1,3 billion and $1,4 billion notes. This
will take it up to $2 billion. Our target is $3 billion, which amounts to about
10 percent of our money supply.”
RBZ deputy governor, Dr Kupukile Mlambo, refused to
disclose the rollout plan, saying it was “sensitive”.
“That is a very sensitive issue . . . I cannot comment on it
either way because I am working from Bulawayo these days,” said Dr Mlambo.
Soiled notes, said Mr Cross, will be removed from
circulation as the new notes are introduced onto the market.
“The other thing is that we have decided that the Reserve
Bank will start buying back soiled notes,” he said.
“We had suspended that operation for some time but we are
now going to restart the operation and an announcement will be made pretty soon
by the bank as to the procedures that will be followed by the commercial banks.
“So we are going to start buying back the soiled notes,
which will then be destroyed. We are trying to clean up some of the older notes
that are out there and maybe are beyond use. Gradually we are getting on top of
the cash situation, cash will still not be in free supply but this is going to
improve matters.”
RBZ Governor, Dr John Mangudya, did not respond to our
questions while economist Mr Kingstone Kanyile said introduction of higher
denomination notes was overdue.
He counselled transparency by the RBZ and banks.
“The higher denomination notes were long overdue if you
just look at the inflationary trends and projections,” said Mr Kanyile.
“Depending on how much they are going to put in the market
it has to be within the requirement of making sure that there isn’t excessive
money going around. This is so because if there is too much printed money we
will have a problem.”
Mr Kanyile said the RBZ would have to exercise moral
restraint in terms of how much they print.
“The RBZ must always be transparent. The black market or
grey market type of lending outside the formal banking system is a serious
matter that has to be dealt with. The Central Bank must gain moral and public
trust.
“This business of a connected individual and a few of his
cronies having all the notes when the economy suffers must stop. Another thing
is that those notes should start from as high as $50 or $100 because that is
the reality of where we are.”
The Zimbabwean dollar was re-introduced in June last year
following a ban on the use of the multiple currency regime that had been in
place since 2009. Government subsequently introduced new $2 and $5 notes and
coins late last year.
The multi-currency system was re-introduced recently. Sunday
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