- The RBZ introduced new $2 coins and $2 and $5 notes following a surge in demand for cash in the informal sector which operates largely on a cash basis or offers discounts for cash. Lately, informal traders have taken to rejecting smaller denominated coins.
FINANCE and Economic Development Minister Professor Mthuli Ncube has revealed that monetary authorities will drip-feed half a billion new notes and coins into circulation in order to ease the demand for physical cash and kill the selling of hard cash.
This will be done over a period of the next six months, brining the total cash in circulation to ZWL$630 million by June 2020.
Since November last year when disbursement of new notes and coins started, the Reserve Bank of Zimbabwe (RBZ) has injected a total of ZWL$130 million into circulation.
Minister Ncube said while half a billion was going to find its way into the economy in the first half of 2020, it would injected sparingly to keep Zimbabwe’s broad money supply — widely believed to be a major driver of inflation — in check.
Broad money is notes, coins in circulation and all deposits within banks, what is called total stock of money.
“We have put in close to $130 million into the economy. Over the next six months we will do half a billion. We are being responsible, prudent and careful.
“We want to make sure that our Zimbabwe dollar remains stable, that it is not a source of price increases,” Minister Ncube said.
He was speaking on the sidelines of a signing ceremony between his ministry and the African Development Bank for the tax and accountability enhancement project (TAEP).
“The central bank will work very hard to make sure that the growth in money supply is within targets so that it does not contribute to currency volatility. This is because once we can de-couple currency volatility from price increases then we are sure that our currency will be a source of value,” he said.
Economists say while the RBZ was right to increase cash in circulation given the high demand, it would take time before cash queues disappear. Already, there are long queues for cash withdrawals at the banks despite the cash that was injected in November last year.
The recommended cash levels in circulation are 10 percent to 15 percent of money supply, which is presently estimated at $19 billion. This means Zimbabwe requires about $2 billion in physical cash, yet there is about $720 million in circulation.
The RBZ introduced new $2 coins and $2 and $5 notes following a surge in demand for cash in the informal sector which operates largely on a cash basis or offers discounts for cash. Lately, informal traders have taken to rejecting smaller denominated coins.
Minister Ncube said the RBZ was tightening controls to maintain the leash on broad money supply, which also drives demand for foreign currency thereby pushing exchange rates up, making it a tool for inflation transmission.
President Emmerson Mnangagwa told Zimbabweans to “defend and protect” the country’s currency from collapse in 2020 in his New Year message to the nation.
“There is no going back on mono currency. Let us individually and collectively defend and protect it as our symbol of national pride and sovereignty,” said the President.
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