The Reserve Bank of Zimbabwe (RBZ) has injected ZWL$120m of new notes and coins into the economy from mid-November to date in a bid to ease cash shortages, a central bank official has said.
The development comes at a time when some retail shops have already phased out coins up to 50 cents due to high cost of living which continues to weigh down purchasing power.
But despite the injection of the new notes, the cash crisis continue to haunt Zimbabweans as the queues at the banks to withdraw ZWL$300 a week (a figure arbitrarily decided by the banks) have not abated.
Kupukile Mlambo, the RBZ deputy governor, told Business Times that the central bank would increase the cash level in the market to help the public from unscrupulous currency dealers who charge premiums on EcoCash and bank transfers.
“Despite our efforts of going cashless, we have realised that cash is still king and people want it in their pockets. Since 11 November, we have injected ZWL$120m into the banking system to deal with cash shortages,” Mlambo said.
“We have also increased the ratio of cash to electronic money to reduce inflation and minimise the premiums on the parallel market. We need to inject between ZWL$1bn and ZWL$2bn in the next six months to reduce the gap between electronic money and physical cash.”
On 11 November, commercial banks collected ZWL$30m of new notes and coins from the RBZ but this has done little to help the situation. With the weekly cash withdrawal limit remaining at ZWL$300, various account holders are struggling to get enough money. This has forced the RBZ to put measures to counter the channelling of cash from banks to the black market and the locking up of the new cash into the informal sector.
Some banks have started feeding money into ATMs. RBZ will closely monitor the movement of cash from banks to depositors to prevent money getting into the hands of illegal cash dealers who have been selling notes and coins to desperate people at premiums of up to 50%.
Most of the premiums are paid by people needing kombi fares. RBZ teams will be on the ground to ensure compliance of the Bank Use Promotion Act. Mlambo said the cash supply would keep improving in the next few days as the monetary authorities continue to drip-feed the market.
The introduction of new notes and coins was meant to increase the amount of cash in circulation to ZWL$2.8bn, from ZWL$855m. Ralph Watungwa, the vice president of the Bankers Association of Zimbabwe, said: “Banks have improved in giving out clients’ money and we hope the situation will improve as money continues to come into the formal banking sector.”
Prices of many goods in tuckshops and in the streets are about a third lower for if buyers’ pay in cash. The informal traders then sell the cash they get for electronic money as they buy their goods in the formal sector.
It is expected that as more cash circulates, arbitrage opportunities will be closed.