ON Tuesday last week, the Reserve Bank of Zimbabwe released into circulation the new $10 notes as part of measures to ease cash shortages and curb the multi-tier pricing system.
The central bank will also roll out a new batch of $20 notes during the first week of June, as Government moves to accelerate the de-dollarisation process and consolidate its Transitional Stabilisation Programme.
The new set of higher denomination notes, worth more than $600 million, will be drip-fed into circulation to control money supply and speculative behaviour.
Since the scrapping of the multi-currency regime last year, inflation has shot up, eroding the value of the $1, $2 and $5 bond notes and coins which were in circulation.
Official figures show that year-on-year inflation as of March this year stood at 676,4 percent, rendering cash transactions cumbersome and, leaving the majority of Zimbabweans opting for digital payment systems.
Although the United States dollar and other foreign currencies are now acceptable as legal tender for domestic transactions for those with access to free funds, Government envisages completing the process of totally de-dollarising the economy within five years, after which the local unit is expected to be the sole legal tender.
The de-dollarisation framework is backed by robust fiscal and monetary policy reforms within the broader macro-economic stabilisation drive being spearheaded by President Mnangagwa’s administration.
The injection of the new $10 notes coincided with the increase in withdrawal limits for depositors, who can now access up to $1 000 a week from their accounts, from $300.
In a move that will further excite the transacting public, daily and monthly limits on EcoCash transactions were also reviewed upwards.
The latest developments will not only deal a body blow to illicit cash deals but go a long way in eliminating the multi-tier pricing system which is eroding the value of disposable incomes.
Official data indicates that around $1,4 billion in cash is circulating in the economy and the new notes will take the figure to about $2 billion.
Ideally, Zimbabwe needs about $3 billion of cash in circulation, which amounts to 10 percent of money supply, but Government is cautiously managing the release of cash to stymie inflation.
In September last year, the amount of cash in circulation was about $500 million, and this will increase in stages until an optimum is reached.
In managing the injection of cash into the economy, monetary authorities are requiring banks to exchange their electronic balances for physical cash to ensure that no new money is created.
This cautious approach does not disturb the monetary balance and takes into account the prevailing inflationary pressures.
Authorities are treading carefully to avoid the pitfalls of the past, which is commendable.
Zimbabweans have endured long queues to access cash at banks, and a thriving illegal market, where premiums of up to 50/60 percent are charged to convert electronic money into cash, adding to their woes.
In most shops, prices of a single product differ depending on the mode of payment.
We hope the latest cash injection will curtail these twin evils while offering respite to the transacting public.
For these measures to succeed, Zimbabweans need to support them by steering clear of speculative tendencies.
In this regard, we urge monetary authorities, in particular the RBZ Financial Intelligence Unit, to be vigilant and monitor cash disbursements at banks.
While we have so far not seen wads of brand new $10 notes being brandished on the illegal cash market, the temptation for some unscrupulous bank employees to clandestinely release them en-masse to their runners to buy forex may be too great given the obvious rewards.
Banks, thus, need to tighten their systems to curb leakages.
The RBZ should also come down hard on errant banks caught flouting its regulations. We are confident that as more notes are released this week and the $20 note comes into circulation next week, the market will react positively so that the value of the Zimbabwe dollar is preserved.
Industry and Commerce, which has been allowed to re-open under Level 2 of the lockdown, should also do its part in supporting the local currency by producing for both the local market and export.
A country is as good as its currency and a depreciation in the value of a nation’s currency is a knock on its sovereignty and territorial integrity.
Zimbabweans need to rally behind Treasury’s efforts to restore the value and integrity of our currency as this is crucial to the much-vaunted Vision 2030 of an upper middle-income economy.
The Zimbabwe dollar will only take its rightful place in the global family of currencies if it is supported, first and foremost, by Zimbabweans.
By undermining our currency through speculative behaviour, we are eroding confidence in it.