THE Reserve Bank was on Wednesday forced to introduce a new 1 000â€“dollar note which was scheduled for the festive season after the bank failed to find a lasting solution to meet the daily cash demands.
Information gathered by Businessdigest yesterday revealed that the Reserve Bank which the IMF says is technically insolvent was under pressure from banks, companies, government and individuals to ensure that the cash situation which has been worsening since the introduction of the new currency improves.
Businessdigest understands that Reserve Bank governor Gideon Gono was advised of “the desperate cash situation” in Casablanca, Morocco where he is said to be out on “official business”.
Gono in turn gave orders for the bank to introduce the new note earlier than scheduled. The note was scheduled to be introduced during the festive season to coincide with increased cash demands associated with the period.
Gono also ordered that the maximum cash withdrawal be reviewed from $500 to $1000 because of skyrocketing costs of goods and services.
Reserve Bank officials told businessdigest that despite the bank reducing its quasi fiscal activities and was no-longer printing money at the rate it used to, it had failed to improve the cash situation.
Bank executives said transactions were taking longer to be processed for companies and banks to receive cash because of the situation.
The situation has also been worsened by the withdrawal of Giesecke and Devrient, a German company which has been supplying Zimbabwe with paper to print money for the past 40 years in June.
Despite Gono saying the Reserve Bank had put in place “pro-active and appropriate” strategies to counter these developments, the situation has been deteriorating.
Memoranda sent to banks on Tuesday with regards to the new notes and maximum cash withdrawal which usually have Gonoâ€™s signature had a different signature.
Bankers Association of Zimbabwe (BAZ) president John Mangudya however said cash shortages could end soon.
“What we are seeing now is the release of pent-up demand for cash which is also a direct indication of the hyperinflationary environment that we are living in,” he said.
Banks interviewed said they were being allocated insufficient money for a half dayâ€™s demand as the Reserve bank did not have money.
Liquidity problems at some of the banks also compounded the problem because such banks were unable to request adequate cash allocations from the central bank.
Reserve Bank officials yesterday said the cash shortages will persist as banks had inadequate Treasury Bills (TB) that they can use as collateral when collecting money from the Bank.
According to the Reserve Bank, banks lacked sufficient TBs to collect cash from the bank which has resulted in stringent conditions to release money onto the market.
Although the Reserve Bank has introduced a higher denomination, long winding queues of people waiting to withdraw their money continue to be a common feature around the central business district.
Banks are required to lodge Treasury Bills at the Reserve Bank as collateral before being given cash that meets their clientâ€™s daily requirements.
Bankers said Treasury Bills which are issued at 340% against official inflation of 11,2 million% will compromise their earnings and force them to scale down on the amounts they have been procuring in cash in relation to deposits.
While the Reserve Bank has kept the accommodation rates very high, annualised at 1,5 decillion%(33 zeros), depositors are languishing with interest rates below 250% per annum.
The Reserve bank also demands 45% of statutory reserves from banks and this according to officials has seen most financial institutions “hurriedly” offloading their securities portfolios to improve their liquidity positions.
Banks have become victims of abrupt policy changes and disposing of their stocks thus becomes the only option to improve liquidity.
Confronted with high inflation, depositors would see little incentive to leave money in the banks, especially now when the interest rates on savings and current accounts are generally below 10% per annum.
Commercial banks are now citing general preference towards Bankers Acceptances over TBâ€™s which no longer have the “all important liquidity status”.
Presently, 30â€“day Bankers Acceptances are being drawn in the market at yields around 1 000%, which, when annualised, leave banks raking in returns of about 147 731%.
These returns are well above the TB returns of 340%. Banks have had few TBs accumulating on their balance sheets.
Gono has however accused banks of creating “artificial” cash shortages by failing to collect money from the countryâ€™s main bank to distribute it to clients.
“Notwithstanding the high levels of cash stocks sitting at the Reserve Bank ready for dispatch into the market, banking institutions have been noted to be engaging in imprudent and unethical practices which are creating artificial queues for cash,” Gono told journalists and bankers recently..
Meanwhile parallel market rates appreciated while stock marketsâ€™ bullish sentiments slowed down after the countryâ€™s three main political parties on Monday agreed to give priority to the restoration of economic stability.
While it might take some time to realise a long-term and sustainable improvement in the economic variables in the short term, a cautiously-optimistic behaviour by speculators, parallel market dealers and investors could see a decline in asset-price inflation through a slowdown in expectational pricing.
The Zimbabwe dollar appreciated against the US dollar on the parallel market on Tuesday from $500 on Friday last week to the US dollar to between $400 and 350 for cash. Real Time Gross Settlement (RTGS) gained to trade around $3 500 to the US dollar yesterday from above $4 600 on Friday last week.
The industrial index recorded its heaviest loss since the beginning of the year on Tuesday after the signing of the power sharing deal between the countryâ€™s three political parties shedding 47,50% while the mining index lost 53,72%. The market however rebounded 34% for the mainstream industrial index and 83% for the mining index.
Investment rates remained subdued during the week owing to high liquidity that is emanating from fiscal and quasi-fiscal expenditure, with the 7-14 day NDC rates remaining largely unquoted. The 30-90 investments rates were quoted in the range of 50-300%, a sign of the low appetite for cash currently on the market.
The 365-day Treasury bill rate was unchanged at 340%.
By Paul Nyakazeya