Dear governor, the market is in a mess
In the wake of the introduction of a new currency, the Zimbabwe Gold (ZiG), the country has gone chaotic down its food chain as goods become expensive on the informal sector.
Zimbabwe has been having its fair share of problems with currency stability for the past 17 years dating back to the infamous ‘Black Friday’ and last week it introduced another currency in the hope of hitting the right code this time around.
This week, we will talk about what the currency change has done in the seven days since the announcement and possible effects in the month of April.
Current currency situation
The Reserve Bank of Zimbabwe, Governor Dr John Mushayavanhu through his Monetary Policy Statement (MPS), said the country will see new notes and coins in circulation thus phasing out the existing ones.
“The introduction of the new structured currency will naturally require the issuance of new bank notes to facilitate transactions in the economy, whilst maintaining the bank’s policy of a cash-lite economy. These notes shall be issued gradually in the market to cater for small transactions and to ensure the availability of change, thus, mitigating the use of retail vouchers in the local economy.
“As such, the proposed denominations will bring convenience to the transacting public. Accordingly, ZiG notes and coins shall be issued in denominations made up of 1ZiG, 2ZiG, 5ZiG, 10ZiG, 20Zig, 50ZiG, 100ZiG, and 200ZiG, which will be distributed through the usual normal banking channels and, will be fully covered by the quantity and value of gold and foreign currency held as reserves,” the MPS read.
However, there has arisen a shortage of paper money in the economy as the public is shunning the old notes whilst the new notes are about three weeks out until they can be seen in the streets resulting in a chaotic situation in the economy.
The governor has tried to calm the situation down by issuing a press statement urging the use of the old notes for transactions till the close of the month.
Unfortunately, the situation on the ground is a result of past decades insecurities caused by the office the governor has just assumed and here are some of the consequences to follow;
Inflation in USD terms
In the current month, inflation figures will come in higher than the previous month even though it is a base month due to the change of currency. With traders shunning the Bond Notes due to the risk of prosecution from holding $100,000 bond cash which is just about US$3.00.
The market is out of change as there is no denomination below US$1.00 or any alternative for such a value, leaving the market adjusting prices up to eliminate the risk of needing to refund customers change.
Transport costs have gone up by 100 percent in most towns as the service providers are not able to give out change to their customers. This is a crucial service which accounts for a significant monthly cost on the citizens budget and they will definitely feel a pinch.
In some instances, people are being paired in order for the transporter to remove the risk of looking for non-existent decimal figures.
Small shops have resorted to selling goods at higher prices, for example a product retailing at US$1.65 is now being priced at US$2.00 which is a 21 percent increase in price.-ebusinessweekly
