Panic over liquidity crisis

ZIMBABWE’S liquidity crisis has deepened, prompting legislators and government authorities to intervene in a bid to avert a disastrous cash crisis.

Taurai Mangudhla

This comes as it emerged this week legislators summoned bankers for an emergency meeting to explain the growing cash crisis while the Ministry of Finance and the Reserve Bank of Zimbabwe have been working flat out to mobilise physical cash to relieve the economy of the biting cash crunch.

Members of the Parliamentary Portfolio Committee on Finance and Economic Development chaired by David Chapfika told businessdigest they had been forced to call for an emergency oral evidence session with the Bankers Association of Zimbabwe (BAZ) this week to quiz them on the current cash situation amid growing panic banks could be running out of cash.

“Yes they have been told to come this Thursday (yesterday), but they said they (BAZ) could not be available,” said a member of the committee, who requested anonymity.

So grave is the cash crisis that the central bank governor John Mangudya has been forced to throw away his cautious routine responses that portray a safe and sound financial services sector, publicly admitting the country faced cash problems.

Mangudya told local media that the demand for cash has been worsened by end of month salary and bonus payments to civil servants. He also blamed the shortages on the business sector for not banking.

He urged Zimbabweans to start using plastic money and save cash, given the country uses imported multiple currencies.
Cash shortages have forced some financial institutions to reduce the daily ATM withdrawal limit further from the stipulated US$3 000 to as little as US$500. As early as November 2015, some banks had reduced their daily ATM withdrawal limits to between US$800 and US$1 000. Cash shortages at ATMs have been prevailing in recent months especially on weekends and public holidays.

Furthermore, some banks have long suspended interconnectivity through ZimSwitch, an electronic payment platform for local banks, at their ATMs or for specific banks to save cash for their clients.

To avert the cash crisis, the RBZ is currently in negotiations with the African Export-Import Bank (Afreximbank) for an import cover facility that will help ease the liquidity crisis, Mangudya told guests at a dinner held in honour of the Afreximbank president Benedict Oramah on Monday.

He said local banks had been forced to dip into their nostro accounts to provide cash for their clients instead of reserving it to pay for imports.

Mangudya said the nostro facility, whose major undertaking is to promote financial liquidity into the economy, would be funded by Afreximbank. The facility will put physical cash into the nostro accounts of selected banks.

“We are still putting in place the facility and are trying to examine the figures and determine the magnitude of the facility so it is a demand driven fund,” he said.

Mangudya said the huge balance-of-payment gap was a major cause of the liquidity crunch, adding the economy needs to start producing and exporting more instead of relying on imports. 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.

Industry sources also hinted syndicates of unscrupulous foreign dealers could be externalising cash on a massive scale. This comes after the RBZ earlier this year said as much as US$2 billion could have been externalised in 2015 through various schemes.