Harambe: NewsDay Zimbabwe: New notes being printed (10/17/19)
NEW bank notes will be introduced into the market in a few months’ time to ease the current serious shortage of cash in the country, a Reserve Bank of Zimbabwe (RBZ) official has revealed.
RBZ deputy director for finance and markets, William Manimanzi, disclosed this yesterday when he appeared before the Budget and Finance Portfolio Committee on Monday together with Pfungwa Kunaka, the acting secretary in the Ministry of Finance to speak on the 2020 National Budget.
He said the new notes were being printed outside the country, and would be the solution to the cash crisis in the country, which has resulted in people being short-changed and charged high premiums by money transfer agents.
Budget and Finance Parliamentary Portfolio Committee chairperson Felix Mhona had asked Kunaka and Manimanzi to explain how the 2020 National Budget would deal with the cash crisis in the country.
Manimanzi told MPs that the issue of the new notes would be announced at the right time.
“There are currency reforms that have taken place over the past few months and we have been working on ways to try and ameliorate the current cash shortages, and what happened was that we had introduced bond notes as an export incentive that were going on a drip feed system,” he said.
“Those funds were allocated to banks, but unfortunately, the bond note has become a commodity and its circulation is now outside the banks. However, there is a programme that the Minister of Finance, Mthuli Ncube has already spoken about.
“I am not privy to the dates, but what is happening is that new notes will be available soon so that they meet the required cash demands. Obviously, these notes are going to be printed outside the country and this requires foreign exchange. That is all I can say at the moment — but maybe in a few months — I do not know exactly when, but those new notes will be available.”
In August, Ncube announced that the country would introduce new monetary notes before the end of the year to ease the cash shortages, but he did not say it would be a new currency.
He said the country would not introduce new monetary notes to replace the quasi currency bond notes, but would introduce replacement notes to address imbalances between cash in circulation and electronic money.
Marondera East MP Patrick Chidhakwa (Zanu PF) then asked Manimanzi to explain the steps that the RBZ had taken to deal with EcoCash agents.
“For instance, where I come from in Nyakurwi, cash is still being sold at 50% premium to rural people and they end up paying $35 EcoCash transfers for transport, (for a journey which) which costs $25 because they do not have cash. As RBZ, you always say that you do not dispense money to money changers, but we always see crisp notes on the streets,” Chidhakwa said.
Kambuzuma MP Willias Madzimure (MDC Alliance) also said the RBZ must explain to Parliament who exactly was behind the EcoCash premium cash distortion.
“Who is in control of EcoCash, and as RBZ, are you still controlling the monetary policy? For example, you pay teachers through RTGS (Real Time Gross Settlement dollars) and when they look for transport using electronic money, they are charged premiums,” Madzimure said.
“What it actually means is that a teacher who earns RTGS$1 000 actually earns RTGS$500 because they need to buy cash. Who are these people, because they have very fat bank accounts and they always have people sitting at different places with bags of cash and exchanging it on a 50% premium?”
He said it was only in Zimbabwe where bags of cash are found on the streets, while banks cannot dispense physical money.
“Selling of cash is not happening in Malawi, Mozambique or Zambia, but it is happening in Zimbabwe. It means that the RBZ is not in control of the monetary policy,” Madzimure said.
Manimanzi said the RBZ only supplied bond notes to commercial banks, adding that the central bank’s Financial Intelligence Unit was investigating the issue of street money deals.
“As RBZ, we deal with cash through the banking system, but we had sectors paid in cash like the cotton and tobacco farmers. Our Financial Intelligence Unit is now trying to look at those bond notes on the streets because if we issue them out, we can trace their serial numbers,” Manimanzi said.
“In terms of the 50% EcoCash premiums, we are aware of this development and that is why over the past few weeks we banned cash-outs, but it was later reversed. We have engaged EcoCash and Potraz [Postal and Telecommunications Regulatory Authority] and a number of merchants have lost their licences and their accounts were closed.”
The RBZ official said Econet explained that the illegal transactions were happening outside their platforms.
“Where the transactions are done at proper EcoCash cash-out platforms, EcoCash is able to deal with that. The solution really is on the supply of cash and its availability,” he said.
“If cash is available, then this will be a thing of the past. As RBZ, we are now working with Potraz and Econet to deal with the issue. We still need EcoCash because it has helped the rural areas in terms of financial inclusion.”
Economist John Robertson urged the central bank to ensure that there is no excessive money printing that will drive inflation.
“The central bank must keep its promises that there will be no excessive money in circulation. Banks have to buy cash from the central bank and the central bank must not put money in circulation that is not paid for by banks. The money must not be excessive as it will drive inflation,” he warned.
“There must limited production of notes, but enough for automated teller machines to start working again. If people start to have confidence in the banking system, there will be stability and they will bank their cash.”
Robertson said at the moment, people were not willing to put cash in banks because they do not know whether they will get it when they need it.
“Another issue is there should be a balance between supply and demand. The exchange rate must be stable. If the exchange rate remains stagnant for a year, inflation will go down. The quantity of money in circulation must not distort currency value,” he said.