By Alois Vinga
ECONOMIC experts have dismissed speculation that the newly introduced ZWL$100 note soon will increase inflation.
They instead said its introduction was long overdue.
Finance Minister, Mthuli Ncube, announced the development though Statutory Instrument 68A of 2022, prompting immediate backlash from opposition parties and other stakeholders who speculated that the move would trigger a spike in inflation.
Economist Prosper Chitambara, said the developments do not have any impact on inflation because the notes are just insignificant.
“The total worth of the new note in US dollar terms is currently equivalent to US$0,68 at the official rate and around US$0,40 when indexed against the parallel market exchange rate,” Chitambara said.
“As it stands, the latest developments indicate that the central bank does not even want to introduce a higher denomination, which seems deserving, considering the current Zim$ worth. The move to neither introduce a new note nor avoid such a move was equally difficult, given the current economic conditions,” he said.
In fact, Chitambara said, the introduction of the new note represents the operationalisation of a plan tabled long back, but which has unfortunately been overtaken by inflationary events.
“The new note may not even do much to aid towards the ease of consumer convenience,” he added.
Another seasoned economist, Vince Musewe, said the move was just long overdue and will not trigger inflation in any way.
“The introduction of the $100 note is necessary because one does not want to carry bulky notes which may be cumbersome. So this development makes it easier for the public. As far as I am concerned, it is a necessary step,” Musewe said.
“However, there may be an impact which comes through with such higher notes as people mark up prices by rounding them off, as an item that was pegged at ZWL$90,00 end up being pegged at $100,00 because consumers do not want to be bothered looking for change. This will be inherent and I do not see it being significant, given that the major drivers of inflation in Zimbabwe are obviously the US$ rate and the money supply factors,” he said.
Musewe said introduction of the higher note does not necessarily push up inflation because if there is ZWL$20 billion in the economy, it remains the same since the same money is moved into bank notes.
“In effect, there will be no significant money supply growth caused by the introduction of the ZWL$100 note. It’s well overdue, given the circumstances at hand, and it will not be surprising if we are to go up to the ZWL$200 note at some stage as South Africa and Botswana have done. The note just improves convenience for those people who are dealing in cash,” he added.
He, however, said the new note may just impact lower denomination notes as was the case when the ZWL$50 note was introduced, which suddenly resulted in the lower denominations disappearing as the minimum prices of goods moved up.
