Economists in Zimbabwe say the Reserve Bank of Zimbabwe’s decision to introduce new currency notes will drive up inflation after the governor, John Mangudya said on Tuesday that the country was introducing new notes to plug monetary gaps.

The Zimbabwean financial sector crisis has given rise to exorbitant premiums on cash. Vince Musewe, an economist in Zimbabwe, said an increase in hard cash through introduction of the new Zimdollar notes will drive informal dealings.

“Increase in hard cash will lead to more speculative economic activity led by informal sector resulting in more demand for USD leading to USD rate increasing and more inflation,” said Musewe.

Zimbabwe is desperate to address a biting financial sector crisis as banks continue to fail to meet demand for cash from depositors. Finance Minister Mthuli Ncube hinted at introduction of a new currency before year end and Mangudya confirmed this, saying the new Zimdollar notes will be introduced next month.

“We will be introducing new $2 coins and $2 and $5 notes. These will not be bond notes but will be equivalent to the bond notes and will be similar in colour to the bond notes,” said Mangudya said after a meeting of the central bank’s monetary policy committee (MPC).

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