October 17 2017 – FOREIGN currency cash transacted in July was $USD 101,82 million down from $334,61 million in April, showing more people are increasingly holding on to the greenback, latest, statistics from the central bank have shown.
This also comes as banks have stopped giving out withdrawals in dollars and are only availing coins and in few instances bond notes. The dollar is seen as a store of wealth instead of the bond note, which has been depreciating against the greenback despite insistence by authorities that it is at par to the dollar.
Based on the cash transacted in each of the individual months under review against bond notes that was reportedly in circulation, the surrogate currency is now the preferred medium of exchange for cash transactions.
On a month-on-month review, based on the Reserve Bank of Zimbabwe’s (RBZ) monthly economic report and bond notes that were reportedly in circulation, April had about $334,61 million United States dollars transacted.
In May, that figure declined to $290,67 million. It further declined to $138,98 million and $101,82 million in June and July respectively.
As such, the United States dollar declined by 13,13% from April to May, 52,18% (May to June) and 26,74% (June to July).
Comparatively, at the start of the year there was $72,9 million worth of bond notes reported to be in circulation with that number rising to $102 million in March, April ($125 million), May ($140 million), June ($160 million), and July ($175 million).
As such, as at July, bond notes constituted 63,21% of the cash in circulation.
Evidence to show that more people are holding on to cash was comparing the amount of cash transacted each month against what the RBZ reported was the cash in circulation of the broad money supply from April to July.
In April, the RBZ reported about $153,53 million, or 2,51% of the broad money supply, was the cash in circulation. In May it was
$175 million or 2,83%, June ($196,05 million or 3,02%), and July it was $201,51 million or 3,07%.
“It is simply because people are holding on to the United States dollars and prefer to trade it rather than use it for transactions as they will get a premium. Presented with an option to use the cash dollar for transactions on 1:1 basis or trade the dollar to get a premium of 60% any rational economic being would prefer the latter option,” financial expert Persistence Gwanyanya, said.
“That is why people are holding on to the cash dollar. It is increasingly becoming a tradable commodity. Unfortunately, this is also the case with bond notes. Electronic money is now the main currency and because of premiums on the bond note people are also holding on to it.”
In August, economist and consultant to the Office of the President and Cabinet Ashok Chakravarti predicted that bond notes were likely to end up accounting for up to 50% of the cash in circulation at the end of the year.
The scarce dollars have seen a thriving underground parallel market, with traders offering a premium of about 50% on dollars. About 25% of companies’ foreign currency requirements come from the black market.
The forex shortages have seen companies struggling to make foreign payments for raw materials amid revelations that a number of suppliers were threatening to turn the screws on struggling local companies.
RBZ has moved in to ease the foreign payments gridlock by securing a $600 million facility from Afreximbank. It has started drawing down on the facility which will run for eight months. – NewsDay