The Reserve Bank of Zimbabwe (RBZ) says it will monitor the circulation of cash ahead of the release of ZWL$1.1 billion in new notes and coins into the system.
RBZ will release bond coins on Monday and the notes will be released over six months.
The current notes and coins in circulation total ZWL$800m of the ZWL$19bn money supply. The standard practice is that notes and coins in circulation should be 10% of the money supply.
RBZ governor John Mangudya told Business Times yesterday that the central bank will introduce the notes and coins in phases until it reaches 10% of the money supply.
“It is RBZ’s wish that banks including bureaux and other customers do not abuse the cash which is going to be released. We expect money to circulate,” Mangudya said.
“We want to caution people from the outset on the abuse of cash and we will be monitoring to ensure that cash is not abused and that money does its function as a medium of exchange.”
The injection of new coins and notes comes amid a biting cash shortage which has seen mobile money agents selling cash at a premium of about 40 percent and informal traders selling their products for cash only and putting a premium on electronic transactions.
The challenge that monetary authorities will face is the dual nature of the economy which is predominantly informal. This means that the formal sector is feeding the informal economy which is failing to return the favour.
This, according experts, makes in critical for government to put in place measures to formalise the economy.
About 70% of the economy is informalised and money does not flow back into the formal economy.
Informal traders at Siyaso, Mupedzanhamo and Glen View operate on cash basis but they do not bank the money. The same applies to vendors.–Business Times