THE Reserve Bank of Zimbabwe (RBZ) has disbursed ZiG46 million in notes and coins to the banks, with the financial institutions only releasing 30% to the market amid a cash crisis, it has been revealed.
On April 5, the ZiG was introduced to replace the Zimdollar after the former was heavily battered by inflation, rendering it worthless.
Notes and coins began circulating on April 30.
Responding to questions about the scarcity of ZiG at the inaugural Capital Markets Conference which ended yesterday in Nyanga, Finance, Economic Development and Investment Promotion deputy minister David Mnangagwa was at pains to address these concerns.
“I did raise concern with the governor about the issue around fear of money not circulating and, indeed, he showed us his dashboard of the amount of notes that have gone to the banks,” Mnangagwa said.
“But, we went further and asked how much have the banks released to the markets and this is where the joke is.
“They have only released 30% of the monies they have been given by the RBZ and what then happens after that is now outside of the RBZ’s control.
“So, you find that most of the fiat money circulates in the informal sector, but the notes are with the banks who only transact with the formal sector. Maybe it’s going to be gradual.”
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RBZ governor John Mushayavanhu last month said the central bank had released adequate quantities of notes and coins consistent with the optimal currency issuance ratio.
He said RBZ had noticed an apparent breakdown in the cash transmission mechanism as evidenced by the low level of ZiG coin withdrawals from commercial banks.
Mushayavanhu encouraged corporates and individuals to approach their banks and withdraw coins for transactional convenience.
There are fears the shortage of notes and coins will work against government’s efforts to promote the use of local currency in line with the dedollarisation drive.
Over 85% of transactions are being conducted in United States dollars, according to data from the Zimbabwe National Statistical Agency.
Mushayavanhu plans to attain a threshold of 70:30 of United States dollar and ZiG transactions, respectively, by year end. The ratio will improve to 60:40 by the end of 2025.
When ZiG was introduced to the market, Mushayavanhu said it had US$285 million backing it and that the amount of local currency to be released would be within that reserve benchmarks.
Mushayavanhu has been saying the ZiG will be drip-fed, adding that he feared inflation might quickly hammer it if it was flooded onto the market.
Critics have, however, said his excuse is not based on economic reasoning.
Mnangagwa said he did not know how to catalyse the movement of notes to the informal sector or to the people.
“But that’s the situation that’s there. The government has released, the RBZ has released the notes to the banks. The banks have only released 30% of these notes and coins into the market and that’s where this crunch is sort of coming,” Mnangagwa said.
The deputy minister was unsure whether the country still had cashback facilities, but urged retailers to go to the banks to get as many notes and coins as they can.
This, Mnangagwa said, would enable customers, especially those who use public transport, to utilise the cashback facility.
“I don’t know if our economy drivers have bank accounts that they need to go and withdraw coins. I think we have to assist each other to make sure that there’s circulation of these notes,” Mnangagwa said.
“So, it is an issue that is, I think, dividing the whole market and we need to come up with innovative ways. I don’t know if the capital markets can help.
“I’m not sure if they actually are concerned about the notes and the coins. Probably not so much, but this is a countrywide issue.”
Previous reports based on a recent survey conducted by our sister publication, The Standard, showed that ZiG notes were not readily available through banks, with shortages observed in various sectors.
These sectors include transport, supermarkets and the informal market.
The inaugural capital markets conference was held through a partnership between the Zimbabwe Independent, the Zimbabwe Stock Exchange and the Securities and Exchange Commission of Zimbabwe.
The conference was running under the theme Fostering the Zimbabwe Capital Markets for Sustainable and Responsible Investing: Opportunities for Investments.
