Cash shortages create market chaos

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ZIMBABWE’S cash crunch has exacerbated over the past few weeks on the back of declining exports and panic withdrawals following the Reserve Bank of Zimbabwe interventions ostensibly to stimulate exports, the Zimbabwe Independent has established.

Bernard Mpofu/Herbert Moyo

Fast running out of options to stem the growing cash crisis, government moved to propose introduction of bond notes and other measures to plug currency leakages to ease the liquidity situation that resulted in low business activity.

The market has been jittery since then as fears of the return of the demonitised local currency resulted in a run on banks. There are also fears of an explosion of black market due to excessive exchange controls, renewed instability in the banking system and currency inconvertibility problems.

Banking institutions have in recent months witnessed increased pressure on their nostro accounts because Zimbabwe is now a net importer due to a wave of company closures and a dramatic fall in production. This has resulted in banks being unable to import cash to meet their clients’ demands and properly perform their financial intermediation role.

Observations by the this paper indicate that most banks now disable their automated teller machines after normal banking hours, while most have increased service charges at a time they have set daily withdrawal limit below the stipulated central bank threshold.

Taking advantage of the cash shortage retail shops are charging a premium for cash-backs, further inconveniencing depositors.

Most local banks such as POSB, ZB and CABS have been hardest hit by the acute liquidity situation with depositors queuing for up to five hours at banking halls to withdraw as little as US$200.

Some banks like Standard Chartered have also stopped opening new bank accounts for customers in desperate measures to stop customers from exceeding bank limits.

Bankers Association of Zimbabwe president Charity Jinya could not be reached for comment at the time of going to print.

An unsustainable trade or current account deficit, poor balance-of-payment position as well as massive revenue leakages and an uneven distribution of liquidity in the market have worsened the cash shortages.

Apart from announcing the imminent arrival of bond notes in US$2, US$5, US$10 and US$20 denominations, Mangudya came up with a series of other measures to promote the circulation of the rand and ther currencies. The other new interventions include daily bank withdrawal limits to US$1 000, ₣1 000, R20 000.

The central bank’s measures came at a time when cash shortages are exacerbating against a backdrop of inadequate capital inflows, low commodity prices on the global markets, deflation and all-round economic implosion. Credit risk remains high in the challenging economic environment.

Meanwhile, supermarkets and wholesalers are cashing on the public’s desperation through cash-outs and even selling money through bank transfers.

One leading supermarket has been offering a maximum cash-back facility of US$100 per day on condition the customer first purchases goods with a minimum value of US$30. As a result the desperate public is losing at least 30% to the supermarkets per transaction.

A leading wholesaler in Harare is also selling cash at a premium to clients. In return for cash, the clients are then required to make bank transfers in favour of the wholesaler.

The developments have opened a window of opportunity to till operators at the supermarkets and wholesalers who have also been using the opportunity to line up their pockets by demanding kick-backs to process the cash-outs to clients.

The wholesaler demands at least 5% more in the bank transfer and given that the transactions are for huge amounts of as much as US$100 000, they are making a huge killing.

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