Eddie Cross, a member of the Reserve Bank of Zimbabwe (RBZ) monetary policy committee (MPC)has said that the central bank intends to simultaneously address the cash shortages and avoid flooding the market with cash.
He made the remarks in an interview with The Herald during which he observed that there is a direct relationship between money supply, exchange rate and the inflation. Cross said:
But the only way to prevent the increase in base money (total money supply) with new cash in the market and the impact on the exchange rate is for the banks to acquire these notes using their RTGS dollar balances.
What we are doing is that we are swapping existing RTGS cash for cash in another form and so there is no impact on money supply and if we maintain that everything should be fine.
He is speaking when the RBZ has introduced $10 and $20 notes with the former having already the market while the latter is expected to be released in June.
While the move is meant to address the acute cash crisis that has lingered for a sustainable period of time now, some are afraid it might increase inflation in the country.
More: The Herald