Government will soon introduce new notes to address the currency crisis as the Zimbabwe dollar (ZWL) continues to devalue, Finance minister Mthuli Ncube has said.
In an interview with America media company ‘Bloomberg’ during the ongoing Word Economic Forum, in Switzerland yesterday, Minister Ncube said the higher dominated notes will make it easier for citizens to transact.
“We are introducing higher denominated notes going $10, $20 and $50 during the course of 2020 that is what we will be doing, introducing higher denominated notes making it easier for citizens to transact.”
With the ZWL dollar continuing to devalue, the current notes of $2 and $5 are worth 12 and 29 US cents, respectively, making it harder for businesses to transact. Already, coins less than $1 are increasingly being rejected in the formal and informal markets as inflation increases.
Further, the reintroduction of the ZWL dollar as the sole legal tender created cash shortages that have seen businesses offer cheaper prices for goods and services paid for in cash compared to electronic money.
This has added to inflationary pressures that are being driven by the devaluation of ZWL dollar as the foreign currency shortage bites.
In his Bloomberg interview, Ncube revealed government’s intention to allow civil servants wages to catch up with inflation as the devaluing ZWL has led to a significant wage erosion.
“We are engaging constructively with the civil servants. In fact, just as I left, two days before I left, we increased the wages to cushion the civil servants and we expect the private sector to do the same. What has really happened, through the currency reform agenda, there has been what we call ‘wage compression’ in economics,
“So, we are having the wages now catch up with the adjustment to the exchange rate because retailers are still pricing in US dollars in their heads and translating that into domestic currency, so it has squashed the purchasing power of wages. And, we are closing that gap by allowing wages to rise, so we know the issue and are dealing with it.” He said
The civil servants’ recent wage increment of 97% means that the least paid worker would take home ZWL$2 033, coupled with a cushioning allowance of $750 for January.
Added together, the least paid worker would be taking a total of ZWL$2 783.