GOVERNMENTâ€™S attempts to improve efficiency and restore confidence in the banking sector by relaunching the Real Time Gross Settlement system and Auto Teller Machines (ATM) could hit a brick wall as banksâ€™ deposits are said to have declined by over 70% since last year.
Economists this week said banks could struggle to dispense cash from ATMs as foreign currency was not circulating in the formal sector.
They also said banksâ€™ access to â€œclean notesâ€ could be a challenge as most notes in circulation were soiled and could jam the machines.
Kingdom Financial Holdings group economist, Witness Chinyama, told businessdigest on Wednesday that banks would face operational challenges in the short-term.
â€œThe issue of old notes in circulation which has been a subject of discussion this week would be addressed by banks themselves.Â Some people think old notes are not compatible with the machines,â€ Chinyama said.
â€œIt is my understanding that banks would have to order new notes from their respective corresponding banks whether in New York or London to address that issue,â€ he said.
â€œOur Reserve Bank is now out of the equation. It cannot issue foreign currency to local banks. Once they are deposited by clients, banks send old notes to their respective corresponding banks in exchange for new notes,â€ Chinyama said.
Zimbabwe has a number of commercial banks with foreign roots, including Stanbic, Standard Chartered, African Banking Corporation, Barclays and MBCA.
Chinyama said under the current arrangement, local banks now act as mere branches of their parent foreign holders.
Premier Banking Corporation has become the first local financial institution to enable its ATMs to dispense foreign currency.
The bankâ€™s clients can now access a minimum of US$1 and a maximum of US$500 from ATMs located in Harare and Bulawayo.
Former Zimbabwe National Chamber of Commerce president, Luxon Zembe said the Reserve Bank had to engage respective centrals banks to get new notes.
â€œThe challenge with the Reserve Bank is to engage the respective central banks for local banks to get new notes,â€ Zembe said.
Zembe said with the South African rand there would be no problems in accessing new notes.
â€œJudging by the relationship that exists between the two countries (Zimbabwe and South Africa) accessing the rand would not be much of a problem. The volume of trade is high between the two countries. But with the American dollar it might be difficult,â€ said Zembe.
Zembe said it was important at this stage for the Reserve Bank to open dialogue with the Fed.
Independent economist John Robertson said while the ATM system was welcome the system was unsustainable.
â€œThe amount of foreign currency in circulation, particularly US dollars, cannot sustain the system for a long period. There is little money in circulation or going to the banks as there are few deposits,â€ he said.
Robertson said the available US dollars were being used by traders to re-stock and import goods.
Economists however questioned the need for the RTGS system under a multi-currency regime where transactions do not require huge volumes of money.
The RTGS is usually effective in a hyperinflationary environment.
Minister of Finance Tendai Biti said the introduction of RTGS and ATMs would only be using the US dollar.
â€œWe are doing this in order to generate efficiency in the economy by allowing our settlement system to use United States dollars,â€ he said.
Restoration of the inter-bank transfer systems, which had become dysfunctional because of the hyperinflationary environment that was prevailing in the country, came as a result of an agreement that was reached between the Finance ministry, Reserve Bank of Zimbabwe and the Bankers Association of Zimbabwe.
The Finance minister said the move would also encourage the use of plastic money, thereby partly addressing the problem of limited supplies of foreign currency in the economy.
â€œWe have to move towards the regime of plastic money and debit cards and so the restoration of ZimSwitch is very critical,â€ said Biti.
BY NQOBILE BHEBHE