Reserve Bank of Zimbabwe (RBZ) Governor Dr John Panonetsa Mangudya has, allayed fears his issuance of higher denominations could trigger inflation through increased money supply.This comes on the backdrop of RESERVE money which refers to local banks’ balances sitting with the RBZ dropping by $917,13 million to $23,53 billion during the week ending July 2, mainly due to payment of taxes which led to an increase in government revenue collections.
RBZ recently issued a $50 dollar note, adding to the $2, $5, $10 and $20 notes already in circulation.
Mangudya said the central bank will closely monitor how much liquidity will be released alongside the new bank notes.
The new $50 note, almost equivalent to United States 59 cents, came into circulation on July 7, with $360 million to be issued through normal banking channels.
Data released by RBZ shows that the decline in reserve money during the period under review largely reflected a decrease of $1,35 billion in banks’ liquidity (RTGS balances), which was partially offset by increases of $400,36 million and $37,13 million in required reserves and currency issued, respectively.
“The fall in liquidity was mainly due to payment of taxes for the quarter ended June 2021, which led to an increase in government revenue collections. As a result, government’s deposits at the RBZ rose by $9,15 billion, over the week under review,” the report states.
Reserve money, also known as high-powered money, base money or central bank money, represents the base level for money supply or the high-powered component of money supply.