Zim bank queues get longer

Source: Zim bank queues get longer – DailyNews Live

Ndakaziva Majaka      8 May 2017

HARARE – Despite authorities injecting more bond notes into the market and
increasing their weekly importation of United States dollars by 50
percent, the government is dismally failing to stem the country’s severe
cash shortages which have seen desperate Zimbabweans besieging
overstretched banks as they despairingly try to withdraw their money.

This comes as banks are reporting a rising demand for cash despite the
aggressive push by authorities to promote the use of plastic money and
mobile platforms as part of their measures to promote a cashless society.

At the same time, analysts warned in interviews with the Daily News at the
weekend that the snaking queues which have become a permanent feature at
banks around the country signalled the fact that “panic” had set in among
both ordinary Zimbabweans and businesses – amid understandable fears that
the dying local economy was hurtling towards the debilitating lows of
2008.

They also said that the accelerating disappearance of the country’s
surrogate currency – bond notes, which were meant to mitigate the
country’s acute cash crunch – was worsening the panic.

This comes as United States dollars have long vanished from the formal
market – with the coveted greenbacks now only easily available in the
country’s thriving black market.

Economist, Godfrey Kanyenze, warned long-suffering Zimbabweans yesterday
that all indications were that the current long cash queues would worsen
as the watershed 2018 elections approached.

“There is a real problem in the sense that what precipitated this problem
in the first place was the government’s fiscal indiscipline … you will
notice that it is because of this imbalance that treasury is scrambling to
pay bonuses which were not budgeted for in the 2017 National Budget …
and therefore the immediate future is not looking good.

“Then of course, there is the fact that the country is headed for an
election and due to the state of things in the country and in Zanu PF,
with its factional fights, populist decisions cannot be ruled out, so this
situation can only be expected to worsen,” Kanyenze told the Daily News.

He also pooh-poohed the $200 million Afreximbank facility from which the
government is getting funding support to print bond notes, saying this was
grossly insignificant, and warning that it was a matter of time before
this was completely exhausted.

“There is a good chance that government will draw down on the facility
without the country experiencing any changes.

“The $200 million is insignificant given the present situation. Government
has more obligations in the coming future and the only way out is
increasing productivity.

“We also need to realise that we can’t borrow ourselves out of this
situation (current economic difficulties),” Kanyenze added.

Another economist, Vince Musewe, also said cash shortages were going to
persist until the country restored confidence in the banking sector and
increased productivity.

“The cash in circulation at slightly over $300 million is too little
compared to the over $6 billion deposits in the sector. The problem is
also that when people get money, the little that they can access, they are
not putting it back into the banks.

“The queues will not go away until such a time that money begins
circulating between the banks and all economic sectors,” he said, also
warning that people were going to continue hoarding cash.

In the meantime, the disappearance of the country’s surrogate currency
from the market is also forcing banks to give desperate Zimbabweans their
cash in sackfuls of coins.

The Reserve Bank of Zimbabwe (RBZ) introduced bond notes at the end of
last year to ease the severe cash shortages, but so far this has
completely failed to satisfy the market’s cash needs.

This has seen banks limiting the amount of money both individuals and
companies can withdraw to as low as $20.

RBZ governor John Mangudya announced at the weekend that the central bank
had so far injected $140 million in bond notes into the market from the
$200 Afreximbank facility.

There were also about $20 million in coins circulating in the market, he
said.

Mangudya also revealed that the central bank had increased its importation
of US dollars, in a bid to try and ease the country’s cash crisis.

“We have stepped up the importation of cash to meet demand. We are now
importing $15 million up from $10 million per week.

“US dollar deposits have increased significantly by between 40 and 50
percent but banks are quick to turn them into nostro deposits,” Mangudya
told the State media.

Last month, the International Monetary Fund (IMF) also noted that bond
notes had failed to solve the country’s deepening economic crisis, further
calling for comprehensive reforms.

“Zimbabwe is in a very, very difficult situation, as you know. There is a
limited amount of foreign exchange inflows coming in and no monetary
policy tool.

“So, it’s very important to have a more comprehensive policy package which
also addresses a lot of the fiscal challenges that the country faces,” IMF
director for the African Department, Abebe Aemro Selassie, said.

Zimbabwe is deep in the throes of a debilitating economic crisis which has
led to horrendous company closures and the consequent loss of hundreds of
thousands of jobs.

At the same time, economists have said that poverty levels in the country
are skyrocketing, with average incomes now at their lowest levels in more
than 60 years – with more than 76 percent of the country’s families now
having to make do with pitiful incomes that are well below the poverty
datum line.

This comes as Zimbabwe has now been officially ranked as the poorest
country in Africa.

According to the Africa 2016 Wealth Report, Zimbabwe has been ranked as
the country with the poorest people on the continent, with average wealth
of $200 per person.

In the report, AfrAsia – a Mauritius-domiciled financial institution which
once operated in Zimbabwe after acquiring the now-defunct Kingdom
Financial Holdings Limited – noted that back in 2000, Zimbabwe was one of
the wealthiest countries in sub-Saharan Africa on a wealth per capita
basis.