THE Reserve Bank of Zimbabwe (RBZ) is this week due to unveil the special coins which are expected to help ease problems with transacting change created after the country adopted a multicurrency system in February 2009.
The central bank said it also expects the coins, which would have the same value as their US counterparts, to help reduce prices as some commodities had been priced with their absence in mind.
According to papers at hand, the special coins will be introduced in 1c, 5c, 10c, 25c and 50c denominations which will be immediately available except for the latter.
An initial amount equivalent to US$10 million will be made available by mid-December.
The coins are being minted in South Africa by a subsidiary of the South African Reserve Bank.
“They are not Zimbabwean coins, we do not want to bring back the Zimbabwean dollar due to confidence issues,” reads papers obtained from the bank.
Introduction of the coins had raised fears that government wanted to return the banished Zimbabwe dollar to replace the multicurrency regime.
But Finance Minister Patrick Chinamasa and RBZ governor John Mangudya dismissed the speculation, insisting there were no plans for a return of the local currency in the medium term.
Chinamasa said the coins are meant to solve the problem of change in transacting.
“I am not a foolish minister, I do not make reckless decisions. I would be reckless to introduce the local currency at this juncture,” he said.
“The small change introduction is, in no way, a subtle reintroduction of our currency.”
Zimbabwe had initially planned to import the coins from with United States of America.
But top finance ministry official, Eria Hamandishe, earlier this year said the plan came off the rail due to the frosty diplomatic relations between the two countries.
Economic analysts say the collapse of the deal was a blessing in disguise as it was going to cost the country a lot of money.
On average coins make up 13 percent of a nation’s currency and coin in issue and this is usually about 10 percent of Gross Domestic Product (GDP).
At Zimbabwe’s current GDP levels of above US$10,8 billion, the total face value of stocks of circulating coins needed for the country could be anything up to US$180 million.Advertisement
“To put this figure into context, that is about 1,400 tonnes of coins that need to be shipped from United States to Zimbabwe.
“This is the equivalent of about fifty thirty-tonne trucks. Additionally, more and more coins will need to be imported over time,” noted one economist.
In any country the number of total coins in circulation always increases because more coins issued are stored and taken out of circulation.
Since 2011, bankers had been urging RBZ to mint coins to alleviate the change problem.
According to a Bankers Association of Zimbabwe proposal, the coins would be exchanged on a dollar-for-dollar basis, enabling people to redeem coins for notes should they accumulate large amounts of coins.
While coin demand in Zimbabwe remains very high, some economic analyst say the arrangement, shipping and transportation costs to import foreign coins had discouraged local banks from even trying to carry out the exercise.
“It is nowhere close to being profitable. How does government intend to recoup the cost of importing and circulating coins in Zimbabwe,” questioned a bank economist.
In modern commerce, the purpose of coins is to make for efficient small value transactions.
Banks do not derive much profit from providing coin services to the transacting public. Generally, the issuance of coins is only profitable to the issuer – usually a country’s central bank.