Liquidity crunch: Zimbabwe banks limit withdrawals

LIQUIDITY conditions have worsened in the last two weeks with more banks limiting cash withdrawals in recent days amid fears the financial services sector is headed for troubled times.

Chris Muronzi

Information gathered by the Zimbabwe Independent shows some banks, particularly indigenous ones, have resorted to withdrawal limits for their clients due to liquidity constraints. Civil servants, some of whom are set to receive annual bonuses this month, may not get their money.

The banking sector, reeling from the liquidity crunch and systemic vulnerabilities, needs a massive cash injection, together with the rest of the economy to avoid a full-blown crisis.

Zimbabwe’s liquidity crunch has been worsened by its negative balance of payment position, with the country importing more than it is exporting. After a prolonged economic and political crisis, Zimbabwe’s economic recovery began with the end of hyperinflation in 2009, supported by the inclusive government, a favourable external environment, multicurrency regime and cash budgeting, but the situation is now deteriorating as shown by company closures.

One banker said yesterday: “The problem now is liquidity is being funneled out just as fast as it comes through the import bill. Unless we get some kind of cash injection via an FDI (foreign direct investment), loans or grants, the situation will get worse.”

Another banking executive said the situation was critical. “There is no stability in the economy and markets because most deposits are transitory deposits; they are funds held in bank accounts from which they can be withdrawn at any time without any advance notice,” the executive said.

The Bankers Association of Zimbabwe says 83% of total deposits are transitory.

Growth in exports has remained low, averaging less than 1% monthly against a background of rising imports and low production. An expansion in imports against static exports means the current account deficit continues to worsen while the economy haemorrhages.

While the central bank maintains broad money supply, which in September stood at US3,9 billion up from US$3,7 billion in August, improved marginally, the liquidity situation on the ground is suffocating.

“Annual broad money growth declined from 5,77% in August 2013 to 4,89% in September 2013,” said the RBZ bulletin. “On a month-on-month basis, money supply recorded an increase of 3,01% to US$3,910 billion in September 2013, from US$3,796 billion in August. The month-on-month increase in broad money was largely due to inflows of US$87,83 million at commercial banks.”

Annual growth in credit to the private sector declined by 1,88 percentage points, from 12,84% in August to 10,96% in September.

However, on a month-on-month basis, credit to the private sector grew by 0,64% in September 2013, from US$3,694 billion in August 2013 to US$3,717 billion. As a result, the loan-to-deposit ratio declined to 95,07% in September 2013, compared to 97,32% in August 2013.

Commercial bank deposits amounted to US$3,3 billion in September, the central bank said.

13 Responses to Liquidity crunch: Zimbabwe banks limit withdrawals

  1. The Patriot November 22, 2013 at 6:05 pm #

    To Dr Gono and Minister of Finance

    Personally I don’t see what all these liquidity problems
    are about.

    There is a two pronged solution:-

    1. Reserve Bank should immediately give
    banks a five year reprieve to meet capital deadlines
    only revisiting the matter in 2019.

    2. Capital that was reserved for bank
    capitalisation should immediately be released
    back to the respective banks for onward productive
    lending at concessionary interest rates and
    easy terms.

    These two strategies will effectively solve the
    liquidity issue without compromising
    mortgaging our mineral resourses and
    stooping to low levels of hat in hand & a
    begging bowl.

    Funding will be channelled to various projects in benefication industries such as the diamond, tobacco industries and import substitution industries. Huge support will also be channelled to the Agriculture and agro-industries: purchase of capital equipment (tractors etc) for farmers and agricultural infrastructure development (dams, irrigation etc) to increase production; support of fertilizer & seed companies to insure there is adequate inputs annually.

    This should effectively help kick start the
    economy, improve the food security and create a
    positive perception about the economy.

    Look, Tsvangirai & his handlers know they
    got into power by squeezing ZANU PF and
    subsequently Government’s balls and naturally
    the West is using the land reform issue to
    meddle in Zim politics. To close that door
    Government should simply call the CFU guys and
    find a lasting solution to their concerns.

    Sometimes the solution is already in our
    hands, instead of always looking out there, globetrotting with a begging bowl. Question
    is: What is in our hands we can use NOW!

    • Obert November 24, 2013 at 4:15 pm #

      There is 1.6 billion dollars a month being stolen from the country through shady personal relationships in the minerals industry. Funny you should be silent on the elephant in the room.

      The rest of your solutions are straw men.

    • frannkly November 25, 2013 at 7:11 am #

      Oh man Mr patriot! You probably have got a good idea! But you know what, the problems that beset the banking industry are deeper that what you can fathom. As much as your suggestions are welcome, the other school of thought begs to suggest otherwise. We have heard of this or other brilliant incentives that can mark a blue print to every facet of economic stimulation over the years yet there is one parameter which we as a country have not dared resolve-Corruption ‘lack of honesty and prudence” . In order for us to follow to the letter, we obviously need to have policy makers that walk the talk..Alas we don’t!

      You remember the years when the central bank facilitated the agric mechanisation scheme?

      What became of it? As for me, I remember somebody making his final payment for the tractor loan off his bus-fare change! The other one I still remember of has had to fore-go bread opting instead to use the money to pay up balance for the 4×4 john deere tractor! It was such a farce! The banking reprieve that you re peddling is a sure case of emptying tones of sugar in a flooded river! man. We definitely will start rolling down one of the trecherous slopes again dont you think so? banks will be emptier than you have ever seen before…

      The issue we so much want to conveniently avoid is political. The curse of legitimacy fullstop!

      Hapana investor anoda kusungira mari mugumbo rengwe!

  2. Jimmy November 22, 2013 at 6:38 pm #

    Your soln is very short-sighted. In such a negative environment, where the productive sector is slowing down significantly, your solution will not work.
    (1) The freshly released cash will quickly find itself out of Zimbabwe, sent by a investor populace that is not very confident of its own country.
    (2) Zanu bigwigs need to demonstrate confidence in their own country by not buying property in Sandton. They will be the first to further transfer new cash out of their own country.
    (3) There is a need to learn the simple lessons that BIti left for Chinamasa. It means curtailing govt spending and promises of huge salary increments for civil servants. When he meant kiya-kiya, he was talking about managing cashflows, especially at month-end. I wonder who is threatening police / revenue collectors with exposure if they don’t remit all those tollgate fees to the fiscus.
    (4) The stunt of cancelling debt owed to Zesa and local councils has put an unneccessary burden on the fiscus.

  3. Guest November 23, 2013 at 1:49 am #

    Consumption vs Production: biggest challenge. Accountability and fair and just Rule of Law: great operational environment. Predicatability of Policy: Long term planning and investment. Autonomy of individuals and democratic freedoms: Creativity of individuals and business. Our issues are findamental structural issues that even if Zanu Pf would dare to face its demons, Zimbabwe will be a great country.

  4. Musungwa Gava November 23, 2013 at 6:27 am #

    Zimbabweans we are good on drawing blue prints as alluded to JIMMY, PATRIOT AND GUEST, the failure by CHINAMASA and his troops to deal with matters of life is shocking. Let us dangle the carrot and stick to investors so that we get the much needed FDI ndochokwadi, tikasadaro people will die, we will go back to the 2008 scenario were nothing is in shops. SOVEREIGN state ine vanhu vane nzara ine youth isina mabasa ine manatural resources that are under utilised, FDI makomrades

  5. Musungwa Gava November 23, 2013 at 6:32 am #

    LET US VOTE BY COMMENTING ON THIS PLATFORM FOR FDI at least if we reach 50 so that they see we are progressive citizens. Ahoooooy

  6. Lee November 23, 2013 at 8:58 am #

    These guys will not read this. Steal elections and this is what you get. By Jan2014 the situation on the ground will be unbearable for 85% of the population

  7. Mbongeni Sakhe November 23, 2013 at 10:34 am #

    What did the MDC say? “They rigged the election, now let us see if they can rig the economy”. This is what happens when you want power for the sake of power, with no coherent economic strategy, or willingness to face to admit your mistakes and seek to do the right thing.

  8. Lissa November 24, 2013 at 4:22 pm #

    http://www.RevenueJob.com/index.php?share=17055
    visit this link and make extra clean bucks upto $500 /week

  9. jonso November 24, 2013 at 9:08 pm #

    vachamushevedza zvekare morgan

  10. George November 29, 2013 at 12:41 pm #

    The only way to get the economy going is thru agriculture and proper handling of the diamond resources. Rebuilding manufacturing industry is a long haul, equipment is worn out, skills have died or emigrated. But the country used to be an economic breadbasket. Register who owns farms only one each. Turn the rest over to the State and encourage farmers to rent them and be productive. And stop all these spivs living of diamond deals

  11. Kumusha December 2, 2013 at 2:21 am #

    What liquidity crisis?

    How bout the land that you craved for and now have? It is not bringing in money?

    And diamonds?
    What became of them?

    You have power ZANU.
    Please Govern!!!
    Stop with the whining and gallivanting to foreign Lands.

    Rule!

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