May 30, 2003

Concern over cash crunch at the banks

Zimbabwe's banks were gridlocked on Friday, May 30, amid severe currency shortages which left thousands of workers facing the prospect of no cash at month's end to buy food and pay bills.

Many of those queueing were hoping to withdraw enough money to stock up ahead of a week of expected stayaways and closed shops as a result of anti-government protests called by the opposition Movement for Democratic Change. Most of the people in bank queues were women, many with children, who had been waiting for hours hoping to draw money, a source at a women's resource centre told IRIN.

Some banks had closed their automatic teller machines (ATMs) and were limiting withdrawals, leaving customers with only enough money for small purchases or to pay an electricity bill, she said. To make sure their families are fed, women are likely to turn to local vegetable plots, or try to secure credit from small traders near their homes.

Central bank Governor Leonard Tsumba said on May 29, that the Reserve Bank of Zimbabwe (RBZ) is to print about $24 billion worth of $500 notes by the middle of June and will introduce a $1 000 note before the end of November. He said "Printing paper started arriving in the country today (May 29) and we'll be running three shifts at Fidelity Printers," he said. The central bank governor said the RBZ had imported two million sheets of bank note paper and Fidelity was running "on full capacity". He also said the central bank would mint $10 and $25 coins at the end of the year.

Economist John Robertson explained that the banks' cash shortage was brought on by an inflation rate of 269 percent, low interest rates discouraging deposits, and a scarcity of foreign currency to buy materials to print money. "There is no advantage to putting money into the bank because the interest rates are so small and, once you put it in, you have trouble getting it out. So, many people have decided to keep their cash," Robertson said. He added that the chronic shortages of food and essential goods in Zimbabwe had reduced people to carrying large sums of cash in the hope of finding a scarce item, or a petrol station with fuel for sale. "Most people are walking around with wads of cash in their pockets all the time in case they find what they are looking for, instead of the cash going into the bank," Robertson said. The amount of cash in circulation had risen to $145,6 billion last week, from $95,8 billion last December. Reserve Bank officials said 90 percent of the money in circulation was in $500 bills.

Banking officials say the note shortage has lead to a black market in the local currency, with some financial institutions paying premiums for deposits. (IRIN / The Daily News, Harare)


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