Printing $100 note an admission of failure

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The Reserve Bank of Zimbabwe

THE Reserve Bank of Zimbabwe (RBZ) this week announced that they will issue a new $100 bank note, amid fears that the bill could stoke inflation in an economy already battered by exchange rate volatilities, stagnant growth, the COVID-19 pandemic and Russia-Ukraine war.

The new note, which is already doomed before hitting the streets, comes as the Zimbabwe dollar has been on a slippery slope since its introduction in 2019.

It also comes a few days after the central bank raised interest rates by 20 percentage points, from 60% to 80% to deal with rising inflationary pressures and the dramatic weakening of the Zimdollar on the parallel market.

But the bank note, the highest denomination of the local unit, is not enough to buy a loaf of bread, indicating how inflation has ravaged the currency.

A loaf of bread retails at between $280 and $300.

Bread prices mirror the Zimdollar’s exchange rate on the parallel market, where it is trading at $315 against the greenback.

The $100, almost equal to US$0,67 using the official exchange rate and only US$0,35 on the black market, joins other denominations which have been eroded by hyperinflation which soared to 800% in 2020 before slowing down to 72,70% last month.

The apex bank announced several months ago that it would issue higher denominations, with the market expressing fears the move could stoke inflation.

Such has been  the fall of the local unit that government has been forced to climb down on its refusal to pay civil servants in hard currency which it had banned as legal tender in 2019. That it is now paying a monthly stipend of US$175 is indicative of the monumental failure of using the local currency without sorting out the required benchmarks for its stability.

It baffles the mind why the authorities keep on issuing worthless notes instead of redollarising the economy.

It is now clear that the Zimdollar project has failed and as such, the government must do the honourable thing and redollarise.

Surely, it doesn’t need a rocket scientist to tell that the Zimdollar has failed. The authorities cannot keep on dishing out valueless notes, stoking inflation in the process and increasing the cost of living in the country.

Or do they want a repeat of what happened during former central bank governor Gideon Gono’s era, where a loaf of bread cost $10 million?

Surely, we cannot be held hostage by the authorities yet it is clear that the Zimdollar is crumbling at an alarming rate. We believe the introduction of the $100 note is authorities’ subtle admission of their failure to stabilise the economy.