Former Zimbabwe Finance Minister Tendai Biti has said the move by the Reserve Bank to introduce a ZW$100 note is ill advised and a waste of time.Biti said the fact that the note can not buy anything on its own is a testimony that it will not solve matters.
“Introducing that note is a mere waste of time, it will not solve anything, the whole currency is useless, inflation is rising everyday, so how will the note which cannot buy anything on its own solve anything? Said Biti
Biti who is regarded as one of the finest finance Ministers Zimbabwe has ever had said the only solution to Zimabwe’s financial crisis is dollarizing or having a strong currency which has a strong backing.
“RBZ should just dollarize or establish a strong local currency but that should be backed with exports and currently the country is not producing anything so the solution is to dollarize,” said Biti
Recently, during at Zimbabwe Public Debt Indaba in Harare recently, Biti called for the disbandment of RBZ saying it has now become a liability to the nation, has become the government and is failing to attend to its core business.
Economists and the business community are sceptical over the introduction of a new note saying the new denomination is too little given the chronic hyperinflationary environment the country is operating in.
During the days of Gideon Gono as governor of RBZ, Zimbabwe had a banknote with a denomination of one hundred trillion Zimbabwean dollars.
Economist Prosper Chitambara said the introduction of the ZW$100 note, would do little to bail out Zimbabwe out of the prevailing economic situation.
“It is a welcome development but ZW$100 in my view is too little and has been overtaken by the chronic hyperinflationary developments. It will not do much to enhance confidence and convenience in the local currency.”
If we convert the new denomination into US$ at an official rate, we get about 68 cents and using the parallel market rate we get about 40 cents, thus ZW$ 100 is not enough to buy a loaf of bread or a newspaper,” said Chitambara.
Another economist Vincent Muswere said historically the introduction of higher denomination bills has always rendered small denominations valueless.
“The introduction of the ZW$ 100 banknote is well overdue given how prices are ever-rising. I will not even be surprised if we have at some stage gone up to ZW$200 like what South Africa has done.
However, there is always an impact when introducing higher denomination notes, business people make up prices at a round figure, so there is inherent inflationary pressure by introducing higher denomination notes.
“Also there is an impact on lower denomination notes. When the ZW$50 note was introduced, the ZW$5 suddenly disappeared, in this case, the ZW$10 note might become a thing of the past,” said Muswere.
Another economist Caleb Gwaindepi said the move from an economic perspective would translate to the continued loss of value on Zimbabwean currency.
“In the past when Zimbabwe had hyperinflation, the authorities introduced bigger denominations of the local currency as a way of enabling people to hold on to money and ensure convenience.
Basically, in economic terms it means the currency continues losing value hence it is an issue of credibility of the currency.”
If the currency continues losing credibility and they continue introducing more bigger denominations, like tomorrow it would be 200, the next time it is 500 or 1000 up to millions, billions or trillions like what happened in the past, basically what it means is that the monetary authorities do not expect their currency to hold value and therefore such introduction might only be done on the pretext of trying to ensure convenience on the part of people to have access to money, but there is no need to introduce larger denominations when you have money.”
Considering that the world is going towards plastic/electronic money, once we see government introducing more paper money or higher denominations, it seems as if they do not expect people to accept their bills because we would have expected that they encourage electronic transactions but given that they are continuing to introduce more and more paper money, it means it is becoming physical where people are not expected to go electronic and not expecting other countries to accept your currency.
As a result they want usage of that currency to be limited within national boundaries as it cannot be used outside as convertible money. In short the situation foretells a bleak future in as far as local currency is concerned and the country may sooner or later revert to the use of millions, billions or even trillions,” said Gwaindepi.
Collen Jonasi who is also an economist is downbeat with what government has done saying the move is going to cause more instability in the market.
“Given what the government has done, the market will react. This is going to cause more instability in the market. The economic participants especially the ones in the informal sector will make sure that the smallest item will be selling at that ZW$100 note. In my view, it is not a good idea for government to introduce a bill that does not buy any significant commodity like bread. It is the wastage of resources printing those bills.”
Also, the first people we shall see having that bill first are the illegal foreign currency traders on the streets, once that money floods the market, the next thing is the skyrocketing of exchange rates,” he said.
Masvingo-based business person is of the view that the move by government to inject the ZW$100 into the already fragile economy is meant to mop US$ from the informal market.
“It is an additional injection of printed money that may be meant to facilitate mopping of additional US $ from the informal market.”
The introduction of the ZW$100 note coincides to support war collaborators that are being currently vetted. The outcome is a further weakening of the local currency that results in increased prices for RTGS pegged goods,” said the business person.
Consumer Council of Zimbabwe(CCZ) Masvingo regional manager Ndumiso Mgutshini is upbeat about the introduction of the new denomination saying it will ease the burden on consumers.
“It is a welcome move as some lower notes like ZW$5 are no longer accepted in the market. The new note will ease the burden on consumers of carrying large sums of notes as we are currently witnessing that some are carrying in paper bags and satchels,” said Mgutshini.
The RBZ on April 06 2022, issued a notice announcing that it is going to introduce a new banknote as gazetted in Statutory Instrument 68A of 2022 by the Minister of Finance and Economic Development.