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'High value denominations will not affect inflation'

by Staff reporter
14 Jan 2021 at 07:52hrs | Views
THE introduction of high value denominations into the economy will not result in high inflation as long as the Reserve Bank of Zimbabwe (RBZ) does not print too much money.

Economic commentators said this in separate interviews following announcement by the RBZ that it is working on introducing a Z$50 banknote into the market to increase physical money supply, curb cash shortages and improve transacting convenience.

At present, Zimbabwe has Z$2, Z$5, Z$10 and Z$20 banknotes in circulation. Economic commentator Mr Trust Chokohora who is also the Political Actors Dialogue economic committee chairperson said printing of high value denominations is a step in the right direction as the country at the moment has smaller denominations, which are inconviniencing the transacting public.

"As to whether it becomes something that leads to greater inflation or not, that will depend on the value of the notes that will be printed and value that will be in circulation," he said.

RBZ Governor Dr John Mangudya said the bank was printing only Z$50 notes and not Z$100 and Z$200 as earlier announced by some sources.

"Overall, you will find that they (RBZ) are likely to drip-feed these notes to try and control inflation," said Mr Chikohora.

According to the Zimbabwe Statistics Agency (Zimstat), the country's annual inflation for 2020 stood at 348,59 percent.

Added Mr Chikohora: "Its just something that will help in terms of people being able to transact a bit more easily but if they (monetary authorities) don't print too much, inflation will remain under control."

A financial market analyst, Mr George Nhepera said of late Zimbabwe's inflationary pressures largely emanated from the unregulated mobile money services sector and unstable foreign exchange market.

"These are now under control hence it's time to bring in higher denominations like we find in other countries in the region. This is for the convenience of the general transacting public including the business sector," he said.

Mr Nhepera said any attempt to disturb the prevailing sanity in the financial markets should be be dealt with decisively by the monetary authorities.

In June last year, Government ordered the Zimbabwe Stock Exchange to suspend trading after the bourse was listed among platforms allegedly used to sabotage the economy by tinkering with the exchange rate thereby promoting illegal exchange rates and currency trades.

Source - chronicle

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