The ‘stability’ of the Zimbabwe dollar against the United States dollar, brought about by the introduction of the foreign currency auction trading system in June last year has given monetary authorities confidence to introduce more banknotes to curb cash shortages for the convenience of the transacting public.
Before the introduction of the forex auction floors, the local currency was depreciating almost on a daily basis with prices of basic commodities also continuously skyrocketing.
The weekly Foreign Currency Auction Trading System resumed Tuesday after the festive season break with the local currency which closed the year at 1: 81.73 against the US dollar, maintaining stability and trading at 1: 82. 09 against the green back.
The Reserve Bank of Zimbabwe (RBZ) closed forex auctions on December 21 as participants had shut down for the festive season.
The central bank, in a trading update released after the Small to Medium Enterprises and the main foreign currency auction sessions Tuesday, said total bids of US$33 million were on the main market with US$2.8 million on the SMEs auction.
The SMEs auction had 196 bids accepted while 11 were disqualified.
At the foreign currency main auction 273 bids were accepted while 32 were rejected.
Before the festive season break, foreign currency allocation at the auction system averaged US$29 million.
The allotments from the two auction systems were largely for raw materials, machinery, retail and distribution, services, fuel, electricity and gas as well as paper and packaging among others.
The apex bank has said it would soon be introducing new bank notes in the denomination of ZWL$50.
Zimbabwe currently has ZWL$2, ZWL$5, ZWL$10 and ZWL$20 in circulation.
The ZWL$10 and ZWL$20 were introduced mid 2020 were introduced in 2016 as bond notes.
“The Reserve Bank of Zimbabwe (the Bank) is working on the introduction of a Z$50 banknote into the market for the convenience of the public,” said RBZ governor John Mangudya in a statement released this week.
“For the time being, the Bank has no plans of introducing ZWL$100 and ZWL$200 banknotes as suggested in some sections of the media.”
However, the National Consumer Rights Association (NACORA) spokesperson Effie Ncube said printing money has never worked.
“The RBZ is trying to address the lack of economic growth caused by poor policy decisions by printing money, something that has never worked anywhere on earth,” he told CITE.
“The new notes will drive up money supply, accelerate inflationary pressures, and result in even higher prices placing goods and services beyond the reach of the poor majority. Not surprisingly, the government is confused and avoiding politically unpopular reforms that will stabilise prices, re-establish lines of credit and drive up economic growth.”
Ncube said while in the short term printing more money could temporarily reduce cash shortages, the net effect is further damage to the economy and “zero benefit to citizens.”
He added: “What the country needs is a functioning economy that creates jobs with better salaries and that generates foreign currency, not worthless notes that buy nothing.”
Some business sectors are now rejecting ZWL 5 notes