Online Reporter
THE new ZiG10, ZiG20 and ZiG50 banknotes start circulating today, with the older ZiG10 and ZiG20 notes remaining valid and only being withdrawn from circulation when they are deposited in a bank account.
It is unlikely that most people will retreat from the convenience they enjoy with electronic transfers by bank card or mobile money, where they do not have to worry about finding or receiving change.
But there are still a lot of small transactions, particularly in the informal sector and for fares or part of fares on buses and kombis, where small denomination bank notes are needed.
So the new notes will help ease the shortage of small denomination US dollar banknotes. The US$1 and US$2 notes, plus many of the US$5 notes, now circulating becoming very worn and tatty and even then in short supply for small payments.
This should advance the acceptability of the ZiG as a transaction currency without imposing any strains on the economy, simply being the next step in the advance of the ZiG in the markets.
As people become used to more ZiG being used in transactions, they will start using the local currency more.
Kombis and many informal pavement traders and most pure cash tuckshops and the like, already use the ZiG20 note as a placer for 50c when their fares or prices include a half dollar.
Neither the kombi crews, vendors nor their customers build up piles of these notes, with most passengers and customers just having one that they have already received in change and which they use the next time they need the placer.
The new notes should allow some more flexibility and start converting what has been a placer into something that can be spent in the formal economy when people want to buy something modest, such as a loaf of bread, a small snack or a soft drink.
This in turn will make the ZiG more acceptable at the lower end of the informal economy since vendors and bus crews can use it to buy groceries at supermarkets, where prices normally are lower and special offers normally cut these further.
We would hope that the wholesalers who supply the informal sector will also be more interested in accepting ZiG.
In light of past experience with local currency banknotes, it is important to note that despite the fairly generous monthly limits on ZiG banknote withdrawals from banks, electronic transfers will still dominate ZiG transactions, especially when value is counted rather than the number of payments.
Banknotes are still a convenience in Zimbabwe although as time marches on we are likely to move ever closer to the cashless economy that some countries, and some regions in other countries, also experience.
For example, most Scandinavian shops now refuse to accept cash, only wanting a simple transfer and there are sections of the British economy where shops refuse banknotes and coins.
Shopkeepers, and now their customers, in these places have found that no one finds it useful to pick your pocket or mug you or rob your store, and the shopkeepers find half their bookkeeping is done for free or trivial cost by their bankers.
The very low ZiG inflation and the relative ease of buying foreign currency for the approved range of imports and outside services means that the other past problem of using anonymous local currency banknotes disappears.
The black market has already contracted dramatically and, even when it operates normally, sees electronic transfers of local currency.
So the complication of people wandering around with bricks of ZiG banknotes is highly unlikely to recur. People will still want ZiG banknotes, but to spend on small purchases rather than make major financial transactions.
The Reserve Bank of Zimbabwe was correct in ensuring that almost everyone accepts that low inflation is likely to be permanent, or at least in the same region as US dollar inflation if war and conflict drive up prices, before issuing new notes so spending more ZiG will not cause inflation and the greater availability of small denominations could even help reduce it a trifle.
The other two planned ZiG banknotes, the ZiG100 and ZiG200, in the BiG5 issue the Reserve Bank is advertising, are not coming out today.
The Reserve Bank, as we all learned to our gratitude, is very careful and conservative and probably wants to see how the smaller notes are used before issuing the larger notes.
But even the ZiG200 note is at current exchange rates only equivalent to around US$7 in a bank and a little over US$6 in a supermarket, so again the plan seems to be to have something that fills the small denomination gaps.
But being careful is a Reserve Bank policy and we have learned to trust and welcome that care, so we will be safe with the new notes.
