Paul Nyathi|Finance Minister Mthuli Ncube and his Reserve Bank Governor John Mangudya have been buoyant over the newly introduced currency claiming that it has come as a solution to the country’s cash crisis. The effectiveness of the currency will be tested this weekend when the country will be without its dominant mobile money platform, EcoCash.

The country’s biggest mobile money service provider announced during the week that it will suspended service over the weekend for almost thirty six hours while undergoing major system upgrade.

Banks started distributing the new money in $2 and $5 notes as well as $2 bond coins on Tuesday a day after its official expected launch.

Government including President Emmerson Mnangagwa himself have expressed hope that the new notes, worth about ZWL $30 million (about US$2 million on the official exchange), will end a cash crisis that has ravaged Zimbabwe for more than two years.

The big question that will be put to test at the weekend will to see if the money introduced will be enough to keep the monetary system running in Zimbabwe if there’s also a mobile money shutdown.

The impact of the cash crisis has been best captured by consumers being forced to pay premiums of up to 50% to get their cash from mobile money agents as well as a run-away Zimdollar vs US Dollar parallel market exchange rate currently at 1:20 against 1:15 on the official interbank market.

The new bank notes means Zimbabwe now has official currency notes since 2009 when the country, ravaged by massive hyperinflation, abandoned its own currency and embraced multi-global units such as the US Dollar and the rand from neighboring South Africa.

Nonetheless, Zimbabwe again slipped into hyper-inflation but the government, which brought the quasi-currency bond notes into the finance system in 2016, is adamant that having a substantive currency is the best way forward. The new notes have evidently been on demand, with banks forced to institute withdrawal limits of ZWL100 (about $7) per day.

In the absence of cash, Zimbabweans have over the past few years heavily relied on mobile money and point of sale platforms for settlement of transactions. According to the Reserve Bank of Zimbabwe’s latest stats, mobile and internet based transactions amounted to ZWL14.57 billion (around $1 billion) for the month of August 2019, representing a 17.2% increase from the previous month. It is against this backdrop that Zimbabweans will likely feel the hard pinch of a planned mobile money outage. EcoCash says it “will be carrying out a major system upgrade”. All services on the platform will be down starting 9pm local time this Saturday till 9pm the following day.

For some, the disruption to EcoCash has come earlier, with some users taking to Twitter to express their frustrations at being unable to make payments at supermarkets. Zimbabwe listed Cassava Smartech, which now holds EcoCash, confirmed via Twitter that online merchant services were currently down as of Tuesday evening. For many shoppers, cash is always the default option but then cash has been in short supply in Zimbabwe.

Demand for cash has somewhat always been elevated in Zimbabwe despite the over reliance on mobile money, most likely because money supply is low. The Monetary Policy Committee of the Zimbabwean central bank admits that the country’s “broad money supply of 4% is low compared to regional and international levels of 10% to 15%”.  In a

, the reserve bank says “cash-based transaction values increased by 17.7%, to close at $1,046.71 million” for the month of August 2019. Transactions settled using bank cards were however also higher, rising by 20.46% to ZWL2.22 billion for the same month.

In EcoCash’s absence this weekend, the newly introduced bank notes will certainly find more takers and users but as has been the case over the years, they may not be enough, with even more shoppers and users likely to be stranded. There is even more skepticism among economic analysts that the new notes will effectively help solve the financial crisis.

“We believe that the introduction of new notes will do little to alleviate (cash) shortages… cash withdrawals from banks have dried up due to severe shortages of physical cash, leaving the public reliant on mobile money agencies who are charging a premium. There is a growing risk that the government will revert to printing money to fund the fiscal deficit, a policy that contributed to hyperinflation in the 2000s,” said Nathan Hayes, an analyst at The Economist Intelligence Unit, on Wednesday.

QZ