Zim gets new $100 note. . .…new bill not enough to buy a loaf of bread 

Source: Zim gets new $100 note. . .…new bill not enough to buy a loaf of bread – NewsDay Zimbabwe

BY TAURAI MANGUDHLA/ HARRIET CHIKANDIWA
THE government yesterday unveiled a legal instrument to introduce a new $100 bank note into circulation as it battles raging inflation.

Indications are that a $200 note will follow soon, following recommendations made in 2019 by the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) that $50, $100 and $200 notes be released into the economy.

The notice, cited as the RBZ (Issue of One Hundred Dollar Bank note) Notice, 2022, or Statutory Instrument 68A of 2022, comes as the Zimbabwe dollar has been on a slippery slope since its introduction in 2019.

It comes a few days after the central bank raised interest rates by 20 percentage points, from 60% to 80% to deal with rising inflationary pressures and the dramatic weakening of the Zimdollar on the parallel market.

The $50, which was the last note to be introduced, went into circulation July 7, 2021, but its value has been eroded by inflation. The new note comes onto a volatile market, with inflation at 72,7% and is not enough to purchase a loaf of bread, which retails at between $280 and $300.

Bread prices mirror Zimdollar’s exchange rate on the parallel market, where it is trading at $315 against the greenback and $146 on the official auction system.

The $100 note is worth about US$0,67 on the auction floor and only US$0,35 on the black-market, which the bulk of citizens in the highly informalised economy rely on.

The fast-weakening local currency has been at the centre of rising inflation, which escalated from 66,11% in March 2021 to 72,70% last month.

Month-on-month inflation declined marginally from 6,99% in February 2022 to 6,31%  last month.

There are fresh fears that the Zimdollar will slide further due to high demand for the greenback on the parallel market.

Introduction of the $100 note comes as RBZ recently pledged to further tighten monetary policies by reducing the quarterly reserve money growth target from 7,5% to 5% for the quarter ending June 2022.

The new note’s basic colour is brown and it is 156mm x 66mm in size.

“The design of the one hundred dollar bank note shall be as follows — on the front side the dominant feature shall be the logo of the Reserve Bank of Zimbabwe (three balancing rocks), with the visually-impaired recognition feature to the left, latent image showing the denomination, windowed security strip inscribed ‘RBZ’ with colour shift from red to green, watermark with highlighted inscription ‘RBZ’ and see-through of Zimbabwe Bird looking to the left in perfect register, as secondary features.

“On the back side, there shall be an impression of Great Zimbabwe monument and the baobab tree, gold coloured iridescent band showing the denomination of the note and see-through of the Zimbabwe Bird looking to the right,” the notice, which was a supplement to the Extraordinary Government Gazette dated April 5, 2022 read.

Development economist Chenayimoyo Mutambasere said the introduction of the $100 bill will have dire consequences on the ailing Zimbabwean economy.

She said this may sound the knell of the currency as use of high denomination notes would, by default, increase prices of basic commodities that would naturally be rounded up to the next 100 as opposed to the next five or the next 10.

“In itself the new higher denomination bill is indicative of free-fall inflation, a far cry from the figures suggested by the RBZ governor (John Mangudya) in his recent statement. I would predict that with the printing of a $100 dollar note, we are not too far off from using 000s as the lowest unit for basic goods.

“Another less desirable compounding effect is that of the increased expropriation charge wherein the cost of illicit market transactions will also increase as they track the higher denomination. According to International Monetary Fund research, high currency bills attract higher value illicit transactions through bribery or other black market transactions,” she said.

Mutambasere added: “The other unique scenario in Zimbabwe is the exchange value for the US dollar, which seems to track that of the Zimdollar. There is a behavioural factor wherein as the Zimdollar devalues, so does the exchange value of the US dollar in Zimbabwe. The impact of this is a co-dependent inflation rate for the US dollar. So as the value of basic goods is expected to round up in hundreds in terms of the Zimdollar, they will inherently also increase in price in terms of the US dollar.”

Economist and former MPC member Eddie Cross said the impact of the new bank notes on inflation will not be very significant given their value in US terms.

He said a $200 note, based on MPC resolutions of 2019, must be introduced soon.

“Given the level of inflation that is there, this new note will not significantly cause inflation, but enable people to transact. The MPC approved the introduction of the $50, $100 and $200 note two-and-a-half years ago, and this is just being done in that sequence and the $200 note will soon follow,” Cross said.

In Parliament yesterday, the government ruled out re-dollarisation despite the sky-rocketing inflation.

Former Finance minister Tendai Biti (Harare East) grilled leader of government business, Justice minister Ziyambi Ziyambi over the issue.

“The cost of living is rising; the cost of basic commodities has risen. What are the measures you are taking to deal with the plight of civil servants, doctors and nurses whose salaries have been eroded?  Why not just dollarise,” Biti said.

Ziyambi then blamed sanctions saying they have directly affected the local currency.

“We will continue with the policies that we are making to ensure that we strengthen our currency and review the salaries of our civil servants. The Minister of Finance (Mthuli Ncube) has been reviewing the salaries of civil servants and has given allowances in foreign currency to cushion them, but we will continue using our currency,” Ziyambi said.