New notes stimulate excitement
TUESDAY’S announcement that new notes will be fed into the market in the next two weeks has excited retailers who trade exclusively in cash, and pushed the parallel market rate for foreign currency marginally down as traders adopted a wait-and-see approach.
Black market forex rates tumbled to US$1:$20 from US$1:$23, as people were hesitant to part ways with their money.
Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya on Tuesday indicated that he will be issuing new $5 notes and $2 coins, to cushion citizens who are being fleeced of their hard earned money by unscrupulous retailers who charge premiums on other forms of payment other than cash.
Mr John Ngwenya, who runs a retail shop in Mbare, Harare, welcomed the RBZ decision to issue new notes saying they would spur his business that was being impacted negatively upon by high premiums of up to 60 percent charged by those with hard cash.
“These money-changers are destroying our businesses and it is hard to survive in this situation,” he said.
“Hopefully the coming in of the new notes will improve the situation.”
A Mbare Musika vegetable trader, Mrs Getrude Kwenje, said when the new notes come, she expected more customers to demand her products as the premiums on mobile money would have been eliminated. Mbare Musika, Harare’s largest market for fruits and vegetables, largely operates on a cash basis, with few suppliers accepting mobile money transactions.
People go there to buy cheaper vegetables, but the saving is destroyed if they have had to pay a premium for cash.
A money-changer who operates in Harare’s city centre, Mr Elton Mitoro, said while the announcement of the new notes was a good move, it resulted in people being reluctant to exchange their money for other currencies, resulting in rates falling yesterday.
“The parallel market rate has started tumbling following the announcement,” he said. “As of last weekend, we were selling US$1 for $23, but now it’s US$1:$20.”
Another money-changer, Mr Miles Mpandawana, said there was a misconception that a new currency was on the cards, resulting in people fearing to lose out in rushed transactions.
Ordinary members of the public welcomed the impending introduction of new notes, saying they will be useful for small transactions such as payment for commuter omnibus fares.
The coming in of the new notes and coins is expected to eliminate multi-tier pricing, which prejudiced consumers of their earnings.
For instance, commuter omnibuses charge $5 cash or $8 mobile money, which travellers say is unfair.
The new notes and coins follow the announcement by Government, through Statutory Instrument 142 of 2019, which also removed the multi-currency regime.
According to SI 142, all local transactions should be conducted in the local currency called the Zimbabwe dollar.
National Business Council of Zimbabwe (NBCZ) president Mr Langton Mabhanga said the introduction of the new notes was “a commendable milestone”. He said Government needed to keep a leash on immigrants who venture into reserved areas such as the retail sector only to mop up forex and repatriate it home.
“For foreigners to get permits to sell plastic dishes, cups, pipes and simple machines is cheap for this country as these are not investors,” said Mr Mabhanga. “In fact, that amounts to shameful ridicule on Zimbabweans and reckless exposure to the economy.
“The monetary authority must also carefully conceptualise policies for our folk in the rural areas.”
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THE Reserve Bank of Zimbabwe ( RBZ) intends to participate on the interbank market through injecting more liquidity to curb pressures on the local currency and enhance efficient allocation of foreign currency, Governor Dr John Mangudya has said.
Only banks are allowed to participate in all dealings in interbank market operations.
The central bank floated the exchange rate in February this year to allow importers and exporters to trade the interim RTGS currency and other foreign currencies.
Prior to the launch of the foreign currency market, the exchange rate between the US dollar and the surrogate bond notes — introduced in December 2016 to partly ease cash shortages — was fixed at 1: 1. It started trading at 2,5 against the greenback.
The liberalisation of the exchange market was part of boarder currency reforms, which saw Zimbabwe re-launching domestic currency in June after outlawing the multi- currency system adopted in 2009 following the collapse of the Zimbabwe dollar.
The value of local currency has since plunged 85 percent against the US dollar since February 23.
The Monetary Policy Committee feels the participation of the central bank will help boost liquidity, ensure stable exchange rate and enhance foreign currency allocation.
About US$ 1,3 billion has been purchased on the interbank market since February.
“The committee noted that the volumes of trades conducted on the interbank market to date are significant but calls for further improvements,” Dr Mangudya told journalists on Tuesday.
“As the central bank, we are working on a facility to ensure that at least we also increase funding into the interbank market. We are going to be more efficient in disbursing those funds.
“This should ensure stable exchange rate and efficient foreign exchange allocation through the market.”
The Economist Intelligence Unit (EIU), a British business arm within the Economist Group which provides advisory services through research and analysis, recently said that local currency is expected to largely stabilise next year before it starts firming against the US dollar on the back of growing confidence in the domestic currency.
According to EIU, the domestic currency would firm to an average of $ 10 against the greenback in 2021, and to an average of 6,1 the following year, as inflation moderates, exports increase and the country realising more foreign direct investment.
“For the interbank market to gain significant traction, we need a stable exchange rate to entice the holders of the ( US) dollars,” economist Mr Brains Muchemwa said.
However, the RBZ’s participation “would be ideal” using forex reserves than borrowed money, Mr Muchemwa said.
Dr Mangudya said the improvements on the exchange market would encompass broadening the scope on permissible products that Bureaux de Change offer to complement the activities of the banks “under a well regulated operational framework”.
MPC member Professor Ashok Chakravati, said while it was commendable that the interbank trades have been increasing, a more stable exchange rate would deepen the market.
The nine- member MPC is chaired by Dr John Mangudya. Other members include the RBZ deputy governors Dr Kupukile Mlambo and Dr Jesiman Chipika, industrialist and former Confederation of Zimbabwe Industries president Mr Kumbirai Katsande, former ABC Holdings chief executive Doug Munatsi, economist and former Bulawayo South legislator Eddie Cross, Professor Theresa Moyo and Mrs Marjorie Ngwenya.