New notes bring relief to transacting public

10 Nov, 2019 - 00:11 0 Views
New notes bring relief to transacting public Dr Mangudya

The Sunday Mail

Lincoln Towindo

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

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

Banks started exchanging part their electronic balances for the new notes with the RBZ this weekend ahead of their planned release into the market.

This means that the release of the new notes will not be inflationary.

The Sunday Mail understands that the central bank will during the course of the week announce a peg on daily and weekly withdrawal limits, in line with the 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 The Sunday Mail 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,” said Dr Mangudya.

“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 queueing for cash.

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

Economist and member of the RBZ Monetary Policy Committee, Mr Eddie Cross, said concerns over inadequate security features prevented the introduction of higher denomination notes.

He said the 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,” said Mr Cross.

“The new cash which will be introduced next week (this week) 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 counterfeit notes produced.”

The central bank is seeking to eliminate cash shortages, which the country has experienced since 2016 as well as high premiums being charged for cash.

The Zimbabwe dollar was reintroduced in June this year following the outlawing of the multi-currency system.

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