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Zimbabwe’s new high-denomination banknote can’t buy a loaf of bread

REUTERS/Philimon Bulawayo
Zimbabwe's new note comes in as Covid-19 causes financial turmoil for most
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This week, the Zimbabwean central bank introduced a 50-dollar note, the country’s highest denomination since a return to using Zimbabwean dollars (ZW$) as the main currency in 2019. It joins other denominations which have been eroded by hyperinflation, which soared to 800% in 2020 before slowing down to 106% this year. The release of this new note, stokes fears of hyperinflation reminiscent of the 2008 era.

The ZW$50 note, worth $0.60 on the prevailing bank rate, is expected to do little to stop rising inflation, stabilize prices, or improve Zimbabwe’s economic prospects. Previous injections of ZW$10 note and ZW$20 notes have failed to ensure economic stability which is largely a result of policy inconsistencies, especially with regards to the currency.

In a statement, the Reserve Bank of Zimbabwe (RBZ), states, “The Bank shall release ZW$360 million through the normal banking channels and banks are expected to fund their respective accounts held at the Reserve Bank and collect the cash from 7 July 2021.”

Economist, John Robertson told Quartz that the introduction of the ZW$50 note, would do little to improve the economic situation. “It will not change anything. The denomination is too small, we needed something that is of value. You will need a whole load to buy something substantial. We have gone the wrong way. We should have gone for higher denominations.”

Robertson called for policy changes to curb the rising cost of living and slow down inflation.

“Costs are still going up, talk of electricity, goods, and services. Government needs to ensure policy consistency,” he said.

The Covid-19 pandemic has plunged almost half of Zimbabweans into extreme poverty

Economic fortunes have worsened during the Covid-19 pandemic which according to the World Bank plunged 7.9 million Zimbabweans into extreme poverty.  This is almost 50% of the population. To buy a loaf of bread, Zimbabweans grappling with price increases will need two of the ZW$50 notes. With most of the goods valued in US dollars, most Zimbabweans are forced to change the local currency on the black market.

Economist, Christopher Mugaga was upbeat about the introduction of the new denomination, doubting that it will trigger inflation pressures. In the past, authorities have been criticized for printing bigger banknotes, conjuring memories of Zimbabwe’s hyperinflationary period, when there were notes in circulation with a face value of ZW$100 trillion.

“This will not have ramifications because it is not money printing. The problem will only arise where there is printing of money. Government is just maintaining 15% of the money supply,” Mugaga said.

The Zimbabwean central bank has set standard levels of cash to total money supply, which ranges anywhere between 10-15%.

Popular journalist, Hopewell Chin’ono and other citizens took to Twitter to air their grievances.

Given the country’s troubled past with currency fluctuations and hyperinflations, Zimbabweans are understandably skeptical about the new note.

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