Zimbabwe begins issuing new notes to help ease cash crunch

Zimbabwe begins issuing new notes to help ease cash crunch
With prices in Zimbabwe rising faster than at any point in a decade amid rapid devaluation of the local currency, cash is king. (AP)
Updated 12 November 2019

Zimbabwe begins issuing new notes to help ease cash crunch

Zimbabwe begins issuing new notes to help ease cash crunch
  • New notes the latest currency reform in the troubled southern African country’s constantly changing monetary framework
  • Zimbabwe now has the world’s second highest inflation after Venezuela, according to IMF figures

HARARE, Zimbabwe: Zimbabwean banks on Tuesday began issuing new notes and coins aimed at easing severe cash shortages, but they are severely limiting the amounts that people can withdraw.
“What can I do with such a pittance?” asked Shorai Tomu after withdrawing the equivalent of about $5. “It can only buy five loaves of bread.”
The new notes are the latest currency reform in the troubled southern African country’s constantly changing, and at times confusing, monetary framework.
Zimbabwe now has the world’s second highest inflation after Venezuela, according to International Monetary Fund figures. With prices rising faster than at any point in a decade amid rapid devaluation of the local currency, cash is king.
In 2009, Zimbabwe’s government abandoned the local currency amid hyperinflation and adopted a multi-currency system dominated by the dollar. In June the government outlawed the use of foreign currencies, opting for a local currency mainly consisting of electronic and mobile money and a trickle of bank notes.
President Emmerson Mnangagwa has struggled to fulfill promises to improve the economy two years after taking office following the resignation of the late Robert Mugabe.
Many retailers and service providers now demand payments in cash only. Others, including street vendors, charge a higher price for goods paid for using mobile money or bank cards.
The Reserve Bank of Zimbabwe says it will “drip feed” ZW$1 billion in the new small notes and coins to manage the cash shortages. The highest denomination is ZW$5. The notes are strikingly similar in design to the old ones.
“It is just like the old money, and like the old money it can’t buy anything of value,” said 81-year-old Filbert Sibanda after withdrawing his monthly pension, enough to buy a kilogram of beef.
Other customers left disgruntled.
“This is not an improvement,” said Wicknell Magidha, waving a few new notes and a plastic bag filled with coins. “These coins are just too heavy.”
People trooped out of one bank carrying similar bags of coins, shaking their heads. Others in line laughed.
Magidha said the small bills and coins leave him with another headache, that of haggling with traders who usually reject them.
“The same item can have three different prices: one for cash, one for mobile money and another one for those paying using small coins,” Magidha said. “The government should just print higher denominations to match this inflation.”


WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range

WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range
Updated 24 January 2021

WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range

WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range

Oil prices have been stable since early January, with Brent crude price hovering around $55. Brent crude closed the week slightly higher at $55.41 per barrel,
while West Texas Intermediate (WTI) closed slightly lower at $52.27 per barrel.

Oil price movement since early January in a narrow range above $50 is healthy, despite pessimism over an increase in oil demand, while expectations of US President Joe Biden taking steps to revive energy demand growth are
still doubtful. The US Energy Information Administration (EIA) reported a hike in US refining utilization to its highest since March 2020, at 82.5 percent. The EIA reported a surprise weekly surge in US commercial crude stocks by 4.4
million barrels. Oil prices remained steady despite the bearish messages sent from the International Energy Agency (IEA), which believes it will take more time for oil demand to recover fully as renewed lockdowns in several countries weighed on oil demand recovery.

The IEA’s January Oil Market Report came as the most pessimistic monthly report among other market bulletins from the Organization of the Petroleum Exporting Countries (OPEC) and EIA. It forecast oil demand will bounce back to 96.6 million bpd this year, an increase of 5.5 million bpd over 2020 levels.

Though the IEA has lowered its forecast for global oil demand in 2021 due to lockdowns and vaccination challenges, it still expects a sharp rebound in oil consumption in the second half of 2021,
and the continuation of global inventory depletion.

The IEA reported global oil stocks fell by 2.58 million bpd in the fourth quarter of 2020 after preliminary data showed hefty drawdowns toward the end of the year. The IEA reported OECD industry stocks fell for a fourth consecutive month at 166.7
million barrels above the last five-year average. It forecast that global refinery throughput is expected to rebound by 4.5 million bpd in 2021, after a 7.3 million bpd drop in 2020.

The IEA monthly report has led to some short term concern about weakness in the physical crude spot market, and the IEA has acknowledged OPEC’s firm role in stabilizing the market.

Controversially, the IEA believes that a big chunk of shale oil production is profitable at current prices, and hence insinuated that shale oil might threaten OPEC market share.

It also believes that US shale oil producers have quickly responded to oil price gains, winning market share over OPEC producers. However, even if US shale oil drillers added more oil rigs for almost three months in a row, the number of operating rigs is still less than half that of a year ago, at 289 rigs.

The latest figures from the Commodity Futures Trading Commission show that crude futures “long positions” on the New York Mercantile Exchange are at 668,078 contracts, down by 18,414 contracts from the previous week (at 1,000 barrels for each contract).