The Reserve Bank has added more bond notes into circulation. The most recent increase came on the 19th of June where they injected ZWL$64 million. This raised the hard currency in circulation from ZWL$ 1,552 billion to 1,661 billion.
The central bank has been cautious in injecting more because there isn’t any confidence in the local currency on the market.
This recent injection buts hard currency bond notes at 11.5% of all the money available.
Both RBZ governor Dr John Mangudya and Finance Minister Mthuli Ncube have said cash will be injected into the economy on a gradual basis.
The local currency is thus still limited in supply resulting in endless queues at banks. Consumers have also resorted to paying premiums to access cash from illegal traders.The Herald
This most recent injection will do very little to make the lives of ordinary Zimbabweans any easier. The money that is in circulation represents only just a fraction of the money that is traded day to day.
International benchmarks say the ratio of cash in circulation to overall money supply (M3) should be between 10 percent and 15 percent.
Meanwhile, the central bank said preliminary reserve money stood at $13.90 billion as at June 19, 2020 from $13.34 billion recorded on June 12, 2020.
It said the marginal increase of 4.3 percent in reserve money over the week was reflected in increases of $417.71 million in RTGS balances; currency issued, $63.94 million; and other deposits, $86.21 million.The Herald
When the money leaves banks, it rarely ever makes it back. A leading reason is that it makes its way to those who are unbanked. The majority of people who trade do so informally. This results in the little increments made by the RBZ not offsetting the lack of physical notes.
Increasing the supply off money may exacerbate the runaway inflation. The reserve bank has been hesitant to introduce higher denominations because of this. However, inflation is still on the rise and it’s pretty clear that there are other factors at play.
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