New $100 banknote won’t be inflationary – Mangudya

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HARARE – Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya said that the soon to be introduced new $100 banknotes will not be inflationary. Mangudya said the higher denomination will improve convenience for the transacting public as the use of small-value denominations is not convenient anymore due to rising inflation. Said Mangudya:

It’s not going to cause inflation because we are not printing any new money. Individuals and businesses can only access cash based only on what they have in their bank accounts. Economic analyst Gift Mugano echoed similar sentiments adding that monetary authorities will not print new money but replace bond notes with Zimbabwe dollars. He said:

The rationale behind the introduction of the $100 banknote is based on the inflationary pressures which are eroding the value of money. So the $100 note will be accommodative in that money should be convenient to the public.

The impact of this will be insignificant in that the authorities are not printing more money but replacing the bond notes with the Zimbabwe dollar.

However, the introduction of the $100 banknotes may be counterproductive due to behavioural issues as businesses tend to increase prices whenever a higher denomination is introduced. Said Mugano:

I would agree with the Reserve Bank Governor when he says this inflation is driven by behavioural changes. So, as the $100 note is introduced (and) the behaviour out there in the market changes, there is a tendency of raising prices when a new note of higher denomination is introduced.

When that happens, the intention of the authorities becomes null and void. Meanwhile, the Reserve Bank of Zimbabwe has not specified the date for the introduction of the new note.

[The Herald]

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