BLESSING MADZIWANZIRA
When Finance Minister Mthuli Ncube outlawed the multicurrency system in February by effectively reintroducing the mono-currency system, yesteryear memories of hyperinflation caused by excessive money printing were brought back.
Zimbabwe’s inflation officially reached 231 million per cent in 2008 and prices of the few basic commodities found on supermarket shelves changed hourly in some cases.
Now prices continue to soar but the local currency remains elusive for many who burn the midnight oil queuing for new bank notes that were injected into the system.
Barely three weeks after the RBZ introduced ZWL$5 notes and ZWL$2 coins, the demand for the domestic currency has shot up. The monetary authorities have promised to contain money supply to cap inflation, and that appears to be working.
However, in the midst of this, the new notes are already finding their way into the parallel market where they are being sold for premiums as high as 50%. The consumer is bearing the brunt of these market distortions.
Last week Ncube told a post cabinet briefing that the injection of new notes and coins would ease the cash shortages and also reduce transaction costs. In places like Mbare Musika, traders are demanding payment of products in bank notes or hard currency.
The rejection of plastic money at such markets has also piled pressure on the demand for bank notes and this demand will likely increase as we approach the festive season. Banks are currently dispensing ZWL$300 per week to individuals – an amount that can meet intra-city bus fare for two weeks. This demand has created arbitrage opportunities for parallel market dealers who are selling notes.
Rosemary Siyachitema of the Consumer Council of Zimbabwe told the Business Times that the central bank should inject more money into the system to ease the cash shortages.
“We are waiting for the RBZ to inject more cash to retrieve the available cash,” she said. “In the past weeks, people were given 40 dollars per day and now it has increased to 100 dollars, which is at least better than a week ago where only 40 dollars was given.”
The Business Times this week interviewed depositors who expressed dismay with the current situation. Some said they were spending up to 6 hours a day queuing for cash at banking halls.
“We are being given ZWL$100 a day which is not enough and a lot of things require cash, we also spend more time waiting for cash withdrawal and sometimes we even go home with nothing as we are told that the cash is finished,” a depositor said.
Economist Chris Mugaga said local banks should intensify their efforts to ensure that new notes do not find their way into the parallel market.
“Some of the banks are supplying cash to the black market, leading to shortages in the banks for customers to withdraw,” he added.
