BANKS are scrambling to avert a looming cash crisis with potentially disastrous consequences as financial institutions struggle to import cash timeously ahead of the festive season.
The banks want government, through the Reserve Bank of Zimbabwe (RBZ), to assist in preventing a cash crisis during the Christmas holiday.
Government sources say fiscal and monetary authorities are keen to intervene so that the re-engagement process with international financial institutions is not derailed.
Cabinet in October approved an ambitious external debt and arrears clearance strategy to pay off US$1,8 billion overdue to multilateral creditors by June next year in a bid to break its debt vicious cycle and secure at least US$2 billion in new funding to rescue a crumbling economy ravaged by recession, a liquidity crunch and deflation, among a plethora of other chronic problems.
The liquidity crunch is exacerbated by dwindling exports that have forced banks, in some instances, to physically repatriate cash in order to deposit into their nostro accounts and fund foreign telegraphic transfers.
“What this means is, say a big client deposits US$1 million, the bank takes it to New York and when depositors come, they have their balances but the bank is not liquid,” a Bankers Association of Zimbabwe (Baz) source said, adding the industry was widely concerned about the cash importation and repatriation procedure.
The Baz official, who requested not to be named, said banks, who are currently individually exporting and/ or repatriating cash, are aggressively pushing for the RBZ to start importing cash for the entire industry in order to improve efficiency and cut costs.
“Importing cash is not an overnight thing, it involves security and a lot of regulatory procedures such as insurance and comes with a lot of risk,” said the Baz source.
“Some banks have the infrastructure to do so individually at reasonable costs, but we are saying if there are economies of scale, it is cheaper and perhaps there will be some buffer of some sort with the RBZ.”
Senior RBZ officials this week confirmed there were delays in settling foreign transactions mainly for locally-owned banks, a situation that is potentially catastrophic.
“What you are going to see very soon is a shortage of fuel because some of the biggest users of telegraphic transfers facilities are fuel importers and supermarkets,” said an RBZ source who requested not to be named.
“Unlike other commodities, fuel has no buffer and that is especially for petrol. What it means is whatever amount of fuel is imported, finds its way directly onto the market. If this trend persists for a few weeks, there will definitely be a fuel shortage on the market.”
Economic challenges characterised by company closures and plunging exports have seen banks being unable to timeously fund foreign transfers, industry sources said.
“What happens is that when a company exports to Europe, for instance, the money is paid in a local banks’ nostro account sitting in Europe and when the bank’s client wants to import, that same money is used to pay for the imports,” said the industry source.
“In our case, the smaller banks, which are mostly local, don’t have exporting clients which means they have to use intermediary banks or maybe repatriate cash physically which has resulted in delays for settlement and could destabilise the banking sector.”
However, RBZ governor John Mangudya allayed fears of a cash crisis saying the banking sector remains safe and sound.
“There are some elements who just want to cause panic and demonise our efforts to push for positive developments such as the debt arrears clearance strategy,” he said.
Zimbabwe’s exports, which used to fund local bank’s nostro accounts, have gone down drastically with industry capacity utilisation continuing to dive with no sign of foreign investment to ease the worsening liquidity crunch.
Capacity utilisation has plunged from 36,5% in 2014 to 34,3% this year, according to the latest manufacturing sector survey. The sector has been struggling to stay afloat as capacity utilisation, which had risen to 57,2% in 2011 declined to 39,6% in 2013.