AS the acute liquidity crunch and cash shortages continue to buffet the economy amid a run on banks due to panic withdrawals, depositors have been hardest hit in this crisis.
Zimbabwe Independent Comment
Depositors have had to grapple with tight withdrawal limits mainly ranging between US$100 to US$300 a day — some banks are offering even lower figures — long and chaotic bank queues, dysfunctional ATMs and extortionate charges.
Local financial institutions have increased service charges by up to 570%, taking advantage of the prevailing cash shortages to rob even loyal clients. This is over and above high costs of credit and astronomical transaction fees.
These problems are linked to the broader economic troubles engulfing the country. Governance and policy failures as well as corruption and looting are the underlying causes of the crisis which has reduced Zimbabwe to economic ruins.
How did we get there? Zimbabwe’s 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 are the major reasons behind the serious cash shortages.
The situation has in recent weeks exacerbated due to depleted nostro accounts balances which have been drained by the ballooning import bill. Banks 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. This situation prompted the Reserve Bank of Zimbabwe to increase the percentage amount that banks could keep in their nostro accounts from 5% to 10% of total deposits. The depletion of nostro accounts held by local banks has given rise to increased bottlenecks in international payments.
As a result, the central bank recently announced the advent of bond notes and export incentives in a bid to improve the liquidity and cash situation. However, the move has caused chaos in the market as people fear a return to the Zimbabwean dollar era in which hyperinflation wiped out savings, pensions and incomes, while ravaging the economy to a shell. All the while customers are suffering the most from high bank charges — spanning all sorts of costs and fees. This includes charges on personal current and cheque accounts. For years now we have been arguing for the lowering of bank charges, saying they are not only too high, but also amount to brazen daylight robbery.
Last week we reported Reserve Bank governor John Mangudya had also expressed grave concern over rising bank charges. This week Steward Bank chief executive Lance Mambondiani said he shared the “outrage” over the “extortionate amounts” charged by banks on their clients. The relationship between banks and their clients is affected by many factors, but charges rank higher. As banks come under growing pressure from shareholders to deliver a good return on investment, this has resulted in high charges and poor service delivery, hence people not banking, worsening the current crisis.
Banks, as agents of financial intermediation, must lower their charges and play a positive role in economic development, not rob their clients of their hard-earned money.