DESPITE frantic efforts by the discredited Reserve Bank of Zimbabwe (RBZ) to solve the worst cash crisis in the country’s history by offloading bearer and traveler’s cheques
and new $1 000 notes to disgruntled customers, kilometres of queues still exist countrywide.
Scenes of jostling and impatient customers in Harare’s central business district this week resembled those of spectators awaiting entry into a football stadium.
The cash fiasco, which has affected everyone in one way or another, resulted in the introduction of bearer’s cheques in denominations of $1 000, $5 000, $10 000 and $50 000 onto the market in tandem with new $500 notes last Friday.
On Wednesday a new $1 000 note, the highest since Independence, was also dished out by the RBZ to a worried public that has been forced to wait in queues from as early as 5:00 am daily for sums as little as $5 000 – enough for four loaves of bread.
Economists maintain that government needs to plug spiraling inflation, now standing at 426,6% for August, for the cash situation to normalise. They have already predicted inflation will continue increasing to surpass the 1 000% mark by year-end.
Trust Holdings Ltd chief executive officer William Nyemba told analysts at a briefing on his institution’s results that what was needed in Zimbabwe were higher denominations “full stop”. He said hyperinflation was “killing the economy”.
While presenting his $672 billion Supplementary Budget to parliament last month the Minister of Finance and Economic Development Herbert Murerwa admitted that the difficult macroeconomic environment characterised by “persistent high inflation”, had necessitated the need for government to go cap in hand to the 150-member august House.
Murerwa said as inflation escalates and economic performance worsened, a growing proportion of the country’s population was now living below the poverty datum line – further deteriorating standards of living.
“Mr Speaker, I believe that it is important that our policies must fight inflation,” Murerwa said. “Continued failure to do so threatens to destroy the very social fabric of the nation.”
In its analysis of the hyperinflationary environment and high money supply growth NMB Holdings Ltd (NMB) said the hyperinflationary trend was driven mainly by the partial relaxation of price controls, excessive credit expansion, shortage of foreign currency and consequent effect and widespread indexation in the economy.
In January, representatives of government, the business community and labour signed a Prices and Income Stabilisation Protocol.
“The protocol’s objective was to manage prices of basic commodities, salaries and wages, through a tripartite price monitoring and surveillance sub-committee, which would negotiate with producers on viable prices for all basic commodities,” NMB said.
“The spiraling inflation is evidence of the protocol’s failure to arrest the pace of price increases in the economy.”
It said unless monetary policy was tightened during the second half of this year, money supply growth was expected to accelerate.
Bearer cheques have been more acceptable to retailers unlike the traveler’s cheques, which have been occasionally rejected.
Both the bearer and traveler’s cheques are, however, deemed “illegal tender” on commuter omnibuses operating in the capital.
Analysts said while the idea to introduce more money onto the market was noble, government did not educate the public on time and sufficiently about the new mode of money, especially individuals in the rural areas where the majority of the nation’s population resides.
Thousands of the nation’s farmers – both new and old – who produce cash crops such as cotton, tobacco, maize, and groundnuts which are delivered daily into town and payment given on delivery reside in the rural areas.
Analysts said it was these individuals who needed to be educated about the new money and not only those living in major cities and towns who have access to plastic money such as credit cards and Automated Teller Machine cards.
Zimbabwe Farmers’ Union president Silas Hungwe this week encouraged small-scale farmers to accept bearer and traveler’s cheques as payment because they are “instruments of the government and are legal tender”.
The sentiments were expressed after several farmers were uneasy about payments being made using cheques. Cotton farmers are notorious for blowing their “hard earned cash” immwdiately after receiving it.
The cash crisis has driven the country’s economy further down the drain.
The complications have encouraged a thriving dealer’s market with individuals now buying and selling money as a form of employment.
The informal sector seems to be the hardest hit at the moment as traders are hesitant to accept payment in cheques. They prefer cash which they use to order more goods.
Flea markets have also suffered. Traders at flea markets prefer cash which they also use to order their goods from Botswana, South Africa and Malawi.
While the RBZ says it is continuing to inject “billions” into the ailing economy, the situation on the ground makes dismal reading.
NMB deputy managing director James Mushore recently told businessdigest that the sooner government realised that the country cannot write new economic rules that ignore supply and demand, the sooner “we can set about implementing solutions to the economic mess that we are in”.