The Reserve Bank of Zimbabwe (RBZ) recently disbursed ZiG46 million in new notes and coins, but a mere 30% has reached the public, exacerbating the ongoing cash crisis. The RBZ introduced the new ZiG currency on April 5 to replace the Zimdollar, which had become virtually worthless due to severe inflation. Despite this effort, and the start of circulation on April 30, significant shortages persist.
At the recent Capital Markets Conference in Nyanga, Deputy Minister of Finance, Economic Development, and Investment Promotion, David Mnangagwa, addressed these pressing issues. “We’ve seen the dashboard showing what was sent to the banks, but the real question is about what they’ve actually released to the market,” Mnangagwa explained, highlighting the gap between distribution and circulation.
John Mushayavanhu, Governor of the RBZ, acknowledged difficulties in the cash transmission mechanism, with only a small fraction of the distributed money being made available for public use. This has resulted in an inadequate level of ZiG coin withdrawals from commercial banks, prompting Mushayavanhu to urge corporates and individuals to increase their interactions with banks to improve the flow of new currency.
The dominance of the U.S. dollar in transactions, accounting for over 85% according to the Zimbabwe National Statistical Agency, is another hurdle in the government’s dedollarization strategy. The RBZ is targeting a transaction balance of 70:30 between the U.S. dollar and ZiG by the end of the year, aiming to shift to 60:40 by the end of 2025.
The sluggish release of the new currency is particularly affecting sectors that rely heavily on cash transactions, such as transportation and retail. Mnangagwa emphasized the need for innovative solutions to improve cash flow to these critical areas, to support economic stability and growth.
Furthermore, the deputy minister expressed uncertainty about the presence of cashback facilities, which are vital for retail transactions, especially for those using public transport. “We’re unsure if the current system supports adequate cashback facilities, but we’re urging retailers to approach banks for more notes and coins,” Mnangagwa stated, highlighting the need for better facilitation of cash transactions in the everyday economy.
The situation calls for a concerted effort from all economic sectors to ensure a more robust circulation of the new notes and coins. Mnangagwa suggested that capital markets might play a role in addressing the currency distribution challenge, though he admitted that the focus might not primarily be on the physical currency aspects.
The conference, a collaborative effort by the Zimbabwe Independent, the Zimbabwe Stock Exchange, and the Securities and Exchange Commission of Zimbabwe, aims to foster discussions on sustainable and responsible investing. It also seeks to find practical solutions to the ongoing economic challenges, including those posed by the current cash crisis.
Source: Newsday
