New currency … Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya gestures as he delivers his 2018 Monetary Policy Statement in Harare, Zimbabwe February 7, 2018 (REUTERS/Philimon Bulawayo)
HARARE – Heralded by the central bank and President Emmerson Mnangagwa as the answer to an acute cash shortage that has hamstrung the country’s economy, new low-denomination banknotes were due to enter circulation on Monday.
But by close of business at 5PM, they had seemingly failed to arrive.
Banks visited by this journalist had yet to receive the new bills, and Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya said he could not immediately comment on why they had not been distributed.
The dearth of cash, along with shortages of staple goods exacerbated by a long drought, has crippled the economy, sending inflation – which economists estimate is running at 380 percent year-on-year – to its highest since 2008.
In that year, hyperinflation wiped out many people’s pensions and savings and forced the country to dump the Zimbabwe dollar currency.
The government unexpectedly re-introduced the Zimbabwe dollar in June to end a decade of dollarisation.
It hopes the new notes will help end the cash shortage, bring down inflation and speed up the restoration of the long neglected domestic currency.
The RBZ said it would issue new $5 and $2 notes as the next stage of that process, similar in design and colour to the bond notes that were introduced in 2016 as a surrogate for U.S. dollars.
It has said it plans to inject Z$1 billion in cash into the economy the next six months.
But many Zimbabweans and market analysts are unconvinced that new notes will do much to alleviate the crisis.
“If only they had introduced higher denomination notes like $50 that would have made more sense. What do you do with $5?” said Rachel Mandeya, a 28-year-old street foreign currency trader.
The $5-note, the highest new denomination, is worth just US$0.32 and is not enough to buy a bottle of Coke.
Tony Hawkins, a professor of business studies at the University of Zimbabwe said the central bank was trying to deal with “symptoms of a bigger problem.”
That included foreign currency shortages, lack of foreign investment, inflation and lack of confidence in policy.
“The new cash will not resolve the economic problems we face… What it means is that we will probably have more cash around to feed the black market for currency,” he added.
Many businesses discount prices by up to 40 percent for customers paying cash and charge more for those using mobile money or bank cards. – Reuters