Some economic commentators said the ZW$50 banknote issued by the Reserve Bank of Zimbabwe (RBZ) recently will fuel inflation in an economy already ravaged by the COVID-19 pandemic.
The ZW$50 banknote, embossed with the portrait of liberation icon Mbuya Nehanda, is now the highest denomination in Zimbabwe but it is not enough to buy a loaf of bread.
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For some economists, the release of the new note has evoked fears of hyperinflation reminiscent of the 2008 era, while others said it would reduce the cost of bank withdrawals.
In 2008, Zimbabwe suffered the second most severe episode of hyperinflation in recorded history.
The annual inflation rate peaked in November of that year, reaching 89.7 sextillion per cent, according to Steve Hanke, an economist and currency expert.
In its weekly review, a civil society organisation, the Zimbabwe Coalition on Debt and Development (Zimcodd), said the new note is a replay of the 2008/2009 inflation experience which resulted in the abandonment of the Zimbabwe dollar. It said:
The highest notes in Zambia, Botswana and South Africa are worth US$4.50, US$18.35 and US$14, respectively–denoting the decimated purchasing power of the local currency.
The concern to the ordinary citizen is: How many groceries can you buy with the ZW$50? One requires two new ZW$50 notes to buy a loaf of bread whilst the full complement of all the notes (ZW$50, ZW$20, ZW$10, ZW$5 and ZW$2), when added together, cannot buy a loaf of bread.
Zimcodd said the value loss of the local currency hinders confidence building by the public, thereby discouraging savings as interest earned is lower than the inflation rate.
Confidence in the Zimbabwe dollar is further weakened by the government preference for payment for its services in the US dollar and this proves the government’s loss of confidence in its very own currency.
Zimcodd further stated that the introduction of the new ZW$50 advances the government’s motive of acquiring the US$ through profit made by issuing the new notes.