As previously advised, the Bank shall soon be introducing a ZW$50 banknote to augment the current stock of banknotes in circulation. The Bank reiterates that banknotes, new or old, do not cause inflation in an economy since they do not increase money supply.
The RBZ said a new $50 note would come into circulation to support the $2, $5, $10 and $20 notes which are already in circulation but have been battered by an inflationary rage. Of which the $2 and $5 are no longer being used in the informal market.
The RBZ will likely drip feed the $50 notes into the market to manage inflation-inducing money supply growth.
Cash payments are an alternative to other methods of transacting and do not constitute money creation.
Price dynamics are influenced by the level of money supply in E& an economy as opposed to its composition (electronic money, transfers, cash, etc.), hence the Bank’s firm commitment to keeping the level of money supply growth under control through its conservative or hawkish monetary targeting framework.
The country has long struggled with severe currency depreciation. It reintroduced the Zimbabwe dollar in 2019 after a decade of dollarisation, but the move failed to end severe cash shortages. Instead, it pushed up inflation and fuelled a thriving parallel currency market.
The bank said the introduction of a foreign currency auction system in June last year had helped to stabilise the parallel exchange rate premium and reduced it to a “tolerable” band of up to 20%.