Government to introduce new currency in two weeks

Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya gestures as he delivers his 2018 Monetary Policy Statement in Harare, Zimbabwe February 7, 2018. REUTERS/Philimon Bulawayo

Harare – Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya has given an indication that government will be introducing a new currency in the next two weeks, the latest of what has been an intense speculation regarding the authorities’ next big move in the face of persisting cash shortages and high cash out premiums.

Dr Mangudya, who also serves as the Monetary Policy Committee (MPC) Chair told a press conference in the capital on Tuesday that the Committee has noted that the level of physical cash in the economy is inadequate to meet transactional demand, considering that the current proportion of cash to broad money supply of 4% is low compared to regional and international levels of 10-15%.

“This low ratio has resulted in undesirable cash premium which the Committee would like to see eliminated,” Dr Mangudya said.

“…the Committee felt that there was a need to boost the domestic availability of cash for transactional purposes through a gradual increase in cash supply over the next six months.”

Dr Mangudya indicated that the cash injection will be done in the form of ZWL2 currency and ZWL5 currency whilst a new 2 bond coin will be introduced into the system in addition to the existing forms of bond notes and coins.

Government earlier in October denied reports attributed to Mr Eddie Cross who also serves as a member of the MPC that a new currency will be introduced in November 2019.

The introduction of a new currency in the face of ongoing macro –economic challenges chief among them low productivity and foreign currency shortages has been criticised by some as untimely and disastrous, posing the threat of further pushing inflation and would see the new currency quickly depreciate in value.

That particular fate has been witnessed following the currency devaluation which saw the introduction of the ZWL$ comprising RTGS balances, bond notes and coins.

Since its introduction, ZWL$ has lost value compared to other foreign currencies largely measured against the US dollar and the South African Rand, as inflation also skyrocketed.

However, Dr Mangudya insists that the new currency and cash supply will be injected in a way that will not trigger inflation.

“This additional cash injection will be carried out through the non-inflationary exchange of RTGS money for physical cash,” he said.

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