Zimbabweans queue as banks run out of cash

Source: Fin24, 11/04/2016

Zimbabweans queue as banks run out of cash
Apr 08 2016 – Fin24
Harare – A US$263m 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
Dr 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 $118m into the banking sector in
the past three months while the government had also chipped in with
about $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.