A US$263 million hard cash injection into Zimbabwe’s economy has not been enough to ease liquidity woes bedevilling the country and prevent financial institutions from running out of cash, central bank governor John Mangudya said on Friday.
The inter-bank platform Zimswitch, which enabled depositors holding bank cards to withdraw money from other banks’ cash machines, has also faltered as banks seek to serve their own depositors with scarce cash.
“We don’t think the money is circulating; that money is not there in the banks,” Mangudya told a parliamentary portfolio committee on Friday.
Foreign banks in Zimbabwe that the government wants to comply with the indigenisation policy include SA lenders Nedbank and Standard Bank as well as international groups Standard Chartered and Barclays.
Zimbabwe – which is pressuring foreign banks to surrender majority shares into the hands of its black citizens – has started to see queues for cash in banks.
The foreign banks, together with other foreign firms in Zimbabwe, are now having their compliance plans with the empowerment policy reviewed by the government. Officials have already said the banks’ plans do not meet requirements.
Cash shortages in Zimbabwe have worsened in the past two weeks, with banks now restricting cash withdrawals and cash machines frequently going “out of order”. Initially, the liquidity crunch was attributed to bonus payments for civil servants and mounting demand from artisanal miners and tobacco farmers.
However, Mangudya said on Friday blamed cash hoarding in the economy, with economists also blaming the “subdued productive performance and capacity in Zimbabwe” which was forcing the country to import most of the consumables and other finished products in the country.
He explained that banks had pumped up US$118m into the banking sector in the past three months while the government had also chipped in with about US$145m; this has however not been enough.
“There is excessive demand for cash. The appetite for holding cash in this country is very high,” he said in response to questions from a parliamentary committee on budget and finance.
Zimbabwe is currently using the United States dollar and other multiple currencies as legal tender, although most of these are hedged against the greenback. This is making Zimbabwe noncompetitive, as most of the major trading partners currencies’ have weakened, according to government officials.
The resource-rich but investment-starved southern African country ditched its own currency in 2009 after it sloughed to record hyper-inflation laws. Calls have started to emerge for the adoption of the Rand.-fin24