Home » General » Thanks for the Coins but … [editorial]

THE Reserve Bank of Zimbabwe (RBZ) recently unveiled bond coins to the public in line with its announcement made in the Monetary Policy Statement of August. When RBZ governor John Mangudya first announced the plan to introduce the special coins, we applauded.

Mangudya indicated when he announced the plan that he wanted to tame the mindset against huge dollar figures and address the problems of small change in daily transactions. He said the coins would have the same value as the United States dollar coins. We are glad the plan has come to fruition, but the RBZ governor should clearly spell out his plans for the rand coins that are circulating and now almost flooding the currency market.

The rand coins, which have been a spontaneous innovation by the market to deal with the lack of coins in the economy, have been trading at par with the US dollar coins at the coin level to avoid complicating daily transactions. The rand notes have been, however, transacting at ruling exchange rates. That situation needs to be dealt with, and those left holding the rand coins after the introduction of the bond coins should not be prejudiced.

The expectation of the RBZ, and indeed that of every Zimbabwean, is that the introduction of the bond coins would necessitate correct pricing for goods and services which had been affected by the absence of coins to small transactions of change. In the ensuing debate to abolish the penny in America, Raymond Lombra, a professor of economics at Penn State University, told a congressional committee that rounding cash sales up or down to the nearest nickel, once the penny was abolished, would cost consumers over US$600 million annually.

Zimbabweans have borne this cost since adoption of a hard currency regime in 2009. The bond coins derive their name from the US$50 million bond coin facility that the RBZ arranged for the purpose of providing the coins with intrinsic value.

Consumers and businesses would be able to exchange the coins for paper money from banking institutions.

The initial amount to be made available in the forms of bond coins is US$10 million, translating to just below two percent of total bank deposits. This will be injected into the economy between December and March 2015. Ideally, the proportion of coins to money in circulation in an economy should be between 20 percent and 25 percent. Obviously, due to the cost of this intervention and the fact that Zimbabwe is using foreign currencies, the RBZ hopes to maintain the supply level at 10 percent.

Source : Financial Gazette