THE Reserve Bank of Zimbabwe (RBZ) injected an additional $20 million in banknotes into circulation in the last week.
Much of the money was channelled to the People’s Own Savings Bank (POSB), which is used to distribute a lot of pensions.
The funds are expected to marginally ease the demand for physical cash.
This was said by Finance and Economic Development Minister Professor Mthuli Ncube in an interview with the State media on the sidelines of a familiarisation tour of the Insurance and Pensions Commission (IPEC) head office in Harare yesterday.
“In the last week alone, we have put in about $20 million,” said Prof Ncube. “We targeted POSB specifically, but not exclusively, because we know that a lot of our ordinary citizens are banking with them and it’s important that they have all the cash that they need.”
Depositors interviewed yesterday said they still faced challenges obtaining cash from banks. Economists say while the RBZ was right to increase cash in circulation given the high demand, it would take time before cash queues disappear. The recommended cash levels in circulation are 10 percent to 15 percent of money supply, which is presently estimated at $19 billion. This means Zimbabwe requires about $2 billion in physical cash, yet there is about $720 million in circulation.
Since the introduction of new notes and coins last month, about $120 million has been injected into circulation.
The RBZ introduced new $2 coins and $2 and $5 notes following a surge in demand for cash in the informal sector which operates largely on a cash basis or offers discounts for cash.
Informal traders say this enables them to buy black market foreign exchange at a discount.
As Unity Day, Christmas and New Year holidays start tomorrow, there has been a rise in demand for cash across the country for bus fares and for spending in rural shops which often charge a high premium for mobile money transfers. This has seen long queues at banks, amid reports that some unscrupulous bank workers were diverting personal withdrawals to the informal cash market where it is sold at about 30 percent premiums, half what was usual a month ago, but still steep. Prof Ncube said as more banknotes were being injected into circulation for the convenience of the transacting public, bigger denominations will start circulating in the first quarter of next year.
Turning to IPEC management and staff, Prof Ncube said the Government was aware of the work underway regarding the revaluation of pensions in light of currency changes in 2009 and this year.