We’ve been quietly anticipating it since then Monetary Policy Committee member Eddie Cross said it was coming and it is finally here. Yesterday the Reserve Bank of Zimbabwe announced the $50 note and even published designs and security features. Now the general public waits with bated breath for the release of the notes. As with all things monetary in Zimbabwe, there are a few interesting talking points.
As the press statement explains the note will be brought into the law through Statutory Instrument 196 of 2021. For the keep count, The 6th of July was day number 187 of the year. With ZWL$360 million worth of notes being released the question that most people were left asking was why the note was being released. We will touch on this pertinent question a little bit later on. Again the notes will be released to banks for RTGS (electronic) balances they deposit with the bank.
The Bank very swiftly published the features of the note. This is not a bad thing at all. In fact, such timeliness and organisation is a good thing it is just not what we have become accustomed to with RBZ. The note registers a first in Zimbabwean money by having the face of a person. It pays homage to the spirit medium Mbuya Nehanda who recently had a statue erected in her honour in Harare. The note will be available for collection by banks from the 7th of July.
Most comments around the note have had to do with the value of the note at the time of launch. It doesn’t matter which way you look at it. If you look at it via the official exchange rate of 85.51 on the 6th of July the note is worth 58 US cents. Parallel market rates are hanging around 120 for cash your ZWL$50 note is worth 42 US cents. With a loaf of bread available for between ZWL$95 and ZWL$130 an individual note cannot buy a loaf of bread. Which brings us to the question of why?
Why has the RBZ chosen to introduce a note worth between 40 and 60 US cents? What problem does this solve? The ZWL$360 million allotment is understood to be the first issue and more notes are expected to be released. Given that the highest denomination note before the $50 note was the $20 note with a value of approximately 16 US cents (at parallel) to 23 cents (at auction rate) there certainly was a need for new and higher denomination notes. I think it’s safe to say Zimbabweans needed a little more than the tripling of the denomination size. Something in the order of 10 or 20 times would’ve been more appropriate.
What comes next?
Consensus on the ground by both professionals and ordinary people is to brace for inflationary pressure. While the RBZ has gone to great lengths to inform us that banks will exchange RTGS balances for the cash and therefore the move will not increase money supply which causes inflation, we have the past to draw on and it says otherwise.