Reserve Bank of Zimbabwe says only 4 percent of its bond notes are in circulation


Data released by Zimbabwe’s central bank shows that only four per cent of bond notes and coins are in effective circulation despite the apex bank releasing nearly $350 million into the economy.

Government released bond notes, a token currency which circulates within a basket of multiple currencies and at par with the United States dollar, in November 2016 to deal with a liquidity crunch while bond coins have been circulating since December 2014.

Both the bond notes and coins are backed by facilities provided by the African Export Import Bank.

Effective circulation refers the portion of issued bond notes that are currently being held by banks. This static measures the ability of banks to meet daily cash demands in light of a worsening cash crisis.

According to the RBZ, as at December 2017 the apex bank had issued $344 million worth of bond notes and coins into circulation and of this total, depository corporations made up of commercial banks and building societies held only $12.58 million which is four per cent of the total issued money.

For comparison, as at December 2016, a month after bond notes came into circulation, the effective rate of circulation stood at 19 per cent which means there was more of the issued money in circulation.

The widening margin between the effective notes in circulation and the actual released amount reflect serious challenges within the economy from a monetary front.

Explicitly it shows that money being funnelled into the banking system is going one way out and not the conventional two way of withdrawal and depositing.

Rent seekers seeking to exploit the cash crisis have resorted to hoarding notes for further express on the parallel market. Hard pressed customers, likewise do not have an incentive to bank the elusive notes whose asking price on the parallel market is now at 30 per cent.

These disparities are a result of huge gap between deposits and the hard cash in circulation.

In a research note, Equity Axis pointed out that the sharp growth in money supply had driven deposits up and thus reducing the reducing the hard cash to deposits ratio which effectively created room for arbitrage in Zimbabwe. – The Source


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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