Harare – Data released by the central bank shows that only 4 percent of bond notes and coins are in effective circulation. Effective circulation refers the portion of issued bonds that are currently being held by banks. This static measures the ability of banks to meet daily cash demands in light of a worsening cash crisis.
According to RBZ, as at December 2017 the apex bank had released or issued $344 million worth of bonds into circulation and of this total, depository corporations made up of commercial banks and building societies held only $12.58 million which is a 4 percent fraction of the total issued money.
For comparison, as at December 2016, a month after bond notes came into circulation, the effective rate of circulation stood at 19 percent which means there was more of the issued money in circulation.
The widening margin between the effective notes in circulation and the actual released amount reflect serious challenges within the economy from a monetary front.
Explicitly it shows that money being funneled into the banking system is going one way out and not the conventional two way of withdrawal and depositing.
Rent seekers seeking to exploit the cash crisis have resorted to hoarding notes for further express on the parallel market. Hard pressed customers, likewise do not have an incentive to bank the elusive notes whose asking price on the parallel market is now at 30 percent.
According to Equity Axis Research , these disparities are a result of huge gap between deposits and the hard cash in circulation.
In a research note, Equity Axis pointed out that the sharp growth in money supply had driven deposits up and thus reducing the reducing the hard cash to deposits ratio which effectively created room for arbitrage in Zimbabwe.
– Equity Axis News