The introduction of new $50 banknotes by the Reserve Bank of Zimbabwe (RBZ) today will not stoke inflationary pressures since they do not add to the country’s reserve money, an economist has said.
This follows the introduction of $50 banknotes by the RBZ, which will come into circulation with effect from today.
Economist and Monetary Policy Committee (MPC) member Persistence Gwanyanya, said there is not going to be an increase in money supply to support price increase. He said:
However, because of our historical experience of hyperinflation, on account of excessive monetary expansion, which was supported by higher cash denomination, RBZ is now overly cautious about higher denominations.
What would be more interesting for the ordinary person to know is that the increase in cash denomination is not going to be associated with the increase in money supply.
The Monetary Policy Committee actually reduced its quarterly reserve money target from 22,5 per cent to 20 per cent to support its disinflation programme.
I know the temptation by our speculative, arbitrageurs and rent-seekers seeking to increase prices as a reaction to the introduction of the new denomination, but the message out there is very clear.
National Business Council of Zimbabwe president Langton Mabhanga believes the new note will ease cash shortages. He said:
Given the current stability, the new note will help with access to cash for those that largely deal in cash transactions.
I expect that those in the horticulture industry, for example, are particularly happy with this development.
But we continue to implore people to continue using plastic money. And we don’t expect the new note to flow to the parallel market or otherwise contribute to illicit activities given all the parameters that are in place and the discipline that we have seen in the market.
According to the Zimbabwe National Statistics Agency, the country’s year on year inflation rate for the month of June 2021 slowed to 106,64 per cent from 161,9 per cent in May.