BY TATIRA ZWINOIRA
GOVERNMENT will soon introduce $50 notes to address the currency crisis in the short term as the Zimbabwe dollar (ZWL) continues to devalue, Finance minister Mthuli Ncube has said.. In June 2019, government reintroduced the ZWL as the sole legal tender without enough foreign currency or market confidence, which has seen it continue to devalue and raise the annual inflation rate to its current 520%.
“First of all, we are doing two things ,we are injecting cash into the economy, feeding the economy, but we want to do it in a non-inflationary way whereby we exchange electronic currency for physical cash,” Ncube (pictured) said yesterday in an interview with American media company Bloomberg during the ongoing World Economic Forum, in Switzerland.
“The second thing is that we are introducing higher denominated notes going $10, $20 and $50 during the course of 2020 that is what we will be doing, introducing higher denominated notes making it easier for citizens to transact.”
With the ZWL dollar continuing to devalue, the current notes of $2 and $5 are worth 12 and 29 US cents, respectively, making it harder for businesses to transact. Already, coins less than $1 are increasingly being rejected in the formal and informal markets as inflation increases.
Further, the reintroduction of the ZWL dollar as the sole legal tender created cash shortages that have seen businesses offer cheaper prices for goods and services paid for in cash compared to electronic money.
This has added to inflationary pressures that are being driven by the devaluating ZWL dollar as the foreign currency shortage bites.
In his Bloomberg interview, Ncube revealed government’s intention to allow civil servants wages to catch up with inflation as the devaluing ZWL has led to a significant wage erosion.
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For example, an average monthly salary of US$500 prior to the reintroduction of the local currency was equal to ZWL$500 post currency change, as at yesterday’s rate of ZW$17.67 to the US dollar, this translates to US$29, representing a US$471 loss in value.
“We are engaging constructively with the civil servants. In fact, just as I left, two days before I left, we increased the wages to cushion the civil servants and we expect the private sector to do the same. What has really happened, through the currency reform agenda, there has been what we call ‘wage compression’ in economics,” Ncube said.
“So, we are having the wages now catch up with the adjustment to the exchange rate because retailers are still pricing in US dollars in their heads and translating that into domestic currency, so it has squashed the purchasing power of wages. And, we are closing that gap by allowing wages to rise, so we know the issue and are dealing with it.”
The civil servants’ recent wage increment of 97% means that the least paid worker would take home ZWL$2 033, coupled with a cushioning allowance of $750 for January.
Added together, the least paid worker would be taking a total of ZWL$2 783.
However, the Total Consumption Poverty Line for an average family of five persons stood at ZWL$3, 656 in November last year with consumer bodies putting that figures between ZWL$4 000 and ZWL$5 000.
