SOME informal traders and public transport operators are rejecting the ZWL$50 note, as the local currency continues to depreciate against the greenback.
The ZWL$2, ZWL$5 ZWL$10 and ZWL$20 notes have since been driven out of circulation on the back of the fast depreciating local currency against the greenback.
The local currency has lost over 18% of its value since the August 23-24, 2023 elections, to reach its current value of US$1:ZWL$5 466,74.
Consequently, informal traders and transport operators are declining to use smaller notes as it would mean moving around with enormous bundles of cash for even small transactions.
A Source Business survey in Chitungwiza, a town on the outskirts of Harare, confirmed that the ZWL$50 note was now being shunned by transporters.
“I am already late for work and this is the only money that I have,” commuter Marrian Chigwada told NewsDay Business. “They are rejecting my money because they are saying that the ZWL$50 dollar note no longer work. They are saying my ZWL$50 are too many and will be hard to dispose of the notes.”
Other commuters indicated similar experiences.
National Consumers Rights Association president Effie Ncube said the rejection of the lower denomination notes was a sign of lack of confidence in the local currency.“The first thing is that this is a response from the market showing a lack of confidence in the Zimbabwe dollar and on the economic policies of government,” Ncube said.
“The ramifications of that would be the continuous decline of the value of the Zimbabwean dollar versus major currencies. That will drive up the prices of goods that are denominated in Zimbabwe dollars. So, in other words it will drive up and put inflationary pressures on the Zimbabwe dollar-denominated prices.”
He said the market was maintaining its preference for dollarisation by rejecting Zimbabwe dollar notes as the greenback offered more stability.
“The people can predict the following day, the day after and the month that comes unlike with the Zimbabwean dollar setting,” Ncube added.
Economist Prosper Chitambara said the rejection of the ZWL$50 note might push government to release higher denomination notes, a move that would increase the money supply.
Monetary authorities have refused to introduce higher Zimbabwe dollar notes for fear of rising money supply, the main cause of the Zimbabwe dollar losing its value.
“Given the challenges we have had, with high inflation I think it’s understandable that most economic agencies would reject the ZWL$50 note because it has obviously been decimated by inflation and it cannot purchase much. So, it then calls on the monetary authorities to come up with higher denominations,” Chitambara said.
“I am sure they would be wary to do that because that would also increase money supply depending on how it is done which can then trigger inflation. But, given the challenges like I have said with high inflation, there is need to provide some bit of convenience, in economic urgency, to the transacting public by coming up with notes that are in line with the inflationary developments.”
Source Newsday
