The government has finally announced that they are ready to tackle the cash shortages that have plagued the Zimbabwean economy for the past few years. They will be introducing a new currency ( actually just new notes which will probably be on par with the current crop of bond notes and coins).

During the cash shortage era, which is hopefully coming to an end soon, the economy had evolved to accommodate the challenges the economy presented. Some of these developments include:

  1. A cash black market that has been selling cash at a premium, it started at around 5% but as shortages became more acute the cash premium percentage has hovered around 50% for notes and 40% for coins
  2. A triple pricing system that is characterised by:
    • The cheapest prices are reserved for bond notes-vendors and shops like them crisp and new
    • Coins come next but these are “rated” i.e. you pay around 10% more than the asking price if you are paying using coins
    • Ecocash and Swipe, some vendors prefer the former over the latter but generally, these are worth the least given the transactional fees involved and the IMT tax of 2% levied on each transaction. One should expect to pay at least 50% more when using these to pay
  3. A foreign currency black market where USD, Rand and other foreign currency is sold in exchange for either bond notes or mostly Ecocash (sometimes ZIPIT)

So what are the implications of the new notes being injected on these? Well, it depends mainly on how much money the RBZ intends to inject in the economy. Right now it’s said to be just $5 notes and $2 coins. The coin part really sucks, the economy has more than enough coins really.

If enough cash is injected the cash out premium is most probably going to fall. Those illegal cash traders are likely going to see their business dying. Bank queues will become shorter or even disappear. Both menaces will not be missed.

Who knows we might even start using ATM machines again instead of dreading the next time you need cash and have to visit a cash vendor who would demand your soul.

The value of the RTGS balances in our accounts and the cash in our pocket are likely to converge. However, the two will never be the same, not as long as there is the matter of the annoying 2%.

As cash becomes more abundant and people start placing less value to it over electronic money it is possible that the Bond-USD (cash rate) will rise too. This is because people who sell their USD on the black market for Ecocash would now be able to easily cash out removing the premium currently placed on cash.Again all this depend on the amount the RBZ releases and they are very wary of printing too much money.

The triple pricing system might even disappear or more likely the disparities between the cash and RTGS prices will become less pronounced. As we have pointed out above there is still the matter of steep transaction fees and the 2% tax that people have to contend with.