Print More Bond Notes To Solve Cash Crisis: Business Tells Govt

The Confederation of Zimbabwe Industries (CZI) has advised the government to introduce more bond notes to solve the cash crisis and to bring convenience to the public. The CZI also called on the government to place a limit on the amount of money that is released through the Real Time Gross Settlement (RTGS) system arguing that the RTGS platform is fuelling inflation and causing price instability.

An excerpt of a plan presented to President Emmerson Mnangagwa on the 11th of December 2017, reads:

What the sterilisation programme outlined above achieves is a de facto cap on overall money supply. The benefit of a cap cannot be overstated. This becomes the source of market confidence. While there has been growth on RTGS, the real value of the RTGS has gone down significantly. While the value of the bond has declined, it has not declined at the rate of decline of the value of the RTGS because the bond has been capped.

So what we are recommending specifically is that the cap on bond is replaced by a cap on RTGS PLUS bond and that enough bond is then released to meet the cash requirements in the economy. This solves the problem of the shortage of cash as a medium of exchange in the economy.

As people withdraw bond from the banks, this will reduce the RTGS balances, further tightening monetary policy as when the bond is in someone’s pocket the money multiplier impact is not felt. In other words, cash money is much less inflationary than electronic money.

More: Financial Gazette

 

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