Stressed banks weep over cash shortages

Source: Stressed banks weep over cash shortages – DailyNews Live

John Kachembere      20 May 2017

HARARE – Bankers yesterday broke their silence over the country’s
worsening cash shortages – confirming in the process that even bond notes
are disappearing from the formal market, amid concerns that the surrogate
currency is now being traded in neighbouring countries by unscrupulous
dealers.

The acute shortage of both bond notes and the much-coveted United States
dollars on the market comes as jittery ordinary Zimbabweans and businesses
are increasingly fearful that the dying local economy is hurtling towards
the debilitating lows of 2008, which saw shops running out of goods due to
world record hyper inflation.

Addressing delegates yesterday, on the second day of the Financial Markets
Indaba being held in Harare, Barclays Bank Zimbabwe managing director
George Guvamatanga said bond notes had vanished from the local market and
were now big business in neighbouring countries.

“It’s not yet established, but there could be more bond notes at Park
Station in South Africa, and in Botswana, Zambia and Mozambique than we
have here in Zimbabwe.

“Someone realised there is an opportunity to sell the bond notes to
Zimbabweans living outside the country, who then don’t have to come here
and queue to withdraw their money from banks.

“At the moment, it’s easier for us at Barclays to give United States
dollars than to give bond notes,” Guvamatanga told transfixed delegates.

“There are lots of Zimbabweans living outside the country and they need
the bond notes, just as we want to use them here,” weighed in Bankers
Association of Zimbabwe president Charity Jinya.

Despite authorities injecting more bond notes into the market, and
recently increasing their weekly importation of United States dollars by
50 percent, the government continues to battle to stem the country’s
severe cash shortages by desperate Zimbabweans who are besieging
over-stretched banks as they despairingly try to withdraw their money.

The disappearance of the country’s surrogate currency from the market has
also often forced banks to give desperate Zimbabweans their cash in
sackfuls of coins.

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

Despite the aggressive push by the Reserve Bank of Zimbabwe (RBZ) to
promote the use of plastic money and mobile platforms, as part of measures
to promote a cashless society, banks have been witnessing rising demand
for cash.

RBZ governor John Mangudya has also blamed the shortages of cash to
externalisation and the spiriting away of dollars and bond notes by
foreign currency dealers from the formal market.

“There is a lot of indiscipline in this economy. There is a thin line
between indiscipline and lack of confidence. People should learn to bank
their money and no one should trade in foreign currency if they are not
registered.

“The bank, in close co-operation with the police and Zimra, has stepped up
operations to deal with that malpractice. It is such indiscipline that has
crept into our society that needs to be addressed to enhance the efficient
circulation of money in the economy.

“It is against this background which has necessitated the bank to
establish a hotline or whistle blower facility as a national approach to
enhance compliance with the rule of law,” Mangudya said.

In previous interviews with the Daily News, economists have also warned
that the country is headed for a major crisis and that the disappearing
bond notes are indicative of an economy “in deep distress”.

“The fact that it is so difficult to get money out of banks also makes
people reluctant to put their money into their banks.

“With 10 million Zimbabweans each carrying a few bond notes in their
pockets, wallets or handbags, 10 million times that number can easily add
up the total amount of bond notes in issue,” veteran economist John
Robertson told the Daily News fortnight ago.

Another economist, Vince Musewe, also said the limits that had been placed
on cash withdrawals were discouraging people from banking their money.

“Because of limits on cash withdrawals, there is no incentive to bank
money. So, for example, retailers would rather hold onto their cash.

“The informal sector is not banking either, so very little is going back
to the banks, hence the worsening shortages.

“In the case of US dollars, nobody banks them anymore. Huge sums are
sitting outside the banking system.

“You then add illicit leakages of export revenues which do not come back
to country and you can then easily see the magnitude of the crisis,”
Musewe said.

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