Zimbabwe economy on the rocks

HARARE – As Zimbabwe’s economy continues to hurtle towards a full blown recession, the country’s biting liquidity and cash crisis is also deepening, with bank clients across the board now singing the blues as they battle to withdraw their cash.
The Daily News established yesterday that depositors with some banks are now spending up to eight hours queuing to withdraw their money, with some of the financial institutions running out of cash.

Bank clients who were interviewed by the newspaper also expressed deep dismay at the deteriorating economic situation in the country which is seeing workers spending a lot of their productive time at work in bank queues.

What appears to have worsened the cash crisis is the fact that virtually all the country’s banks have now imposed even stricter withdrawal limits, with some of them allowing depositors to get as little as $50 a day — significantly down from the Reserve Bank of Zimbabw prescribed $1 000 daily limit, as authorities battle to contain the worsening situation.

“It definitely feels like we are back to 2008,” said 32-year lab technician Lucia Moyo adding, “I have been waiting in this queue for close to three hours only to be told that the bank has run out of money.”

The mother of two said unless authorities came up with new strategies to stimulate confidence in the economy and financial services sector, banks would soon be left with only a handful of depositors.

Economic analysts who spoke to the Daily News savaged President Robert Mugabe’s “clueless government”, which they accused of focusing on “its senseless succession bloodletting” instead of working to rejuvenate the country’s dying economy.

“As business, we are very concerned about what is happening as the current challenges are manifestations of structural rigidities. Long back such a situation would have ended with us at the printing press to address the issue, but unfortunately we are not using our money.

“The way I see it, no policy intervention will solve the problem as long as we are using the United States Dollar (US$). So, government needs to carefully examine its next move,” Zimbabwe Chamber of Commerce (ZNCC) chief executive Takura Mugaga said.

The ZNCC boss added that while there was a possibility that the problem could be solved, any measures that would be taken were likely to be short-term.

“Yes, they may manoeuvre out of this one, but pressure will still be there. There is no confidence and trust in the market even if plastic money was to be used extensively.

“An end to the cash problems will not be permanent as there are deeper problems in the economy. Industry needs to perform before order can be restored,” he said.

The country has been experiencing acute cash shortages since early this year — with queues at banks reminiscent of the hyperinflationary era of eight years ago returning to most urban areas with a vengeance, as depositors struggle to get their hard-earned money.

Even reputable foreign-owned banks are now also feeling the economic and cash squeeze, disbursing as little as $150 per day to their frustrated clients.

At the beginning of the month when the central bank announced it had slashed maximum withdrawal limits from $5 000 to $1 000, many Zimbabweans thought this would not be a big deal as the local salaries average around $350 a month.

However, banks have lately been issuing as little as $50 per day, with many Zimbabweans now turning to supermarkets for cash-backs as their withdrawal means. However, some supermarkets have since closed down that option.

Despite the worsening challenges, Mugabe’s government predictably continues to refuse to take the blame, blaming everyone else, including the “evil West” and even local depositors themselves for allegedly fuelling the cash crunch through “pillow banking”.

Even the normally unflappable and prudent Finance minister Patrick Chinamasa also recently blamed depositors for fuelling the country’s biting cash crisis by keeping their money outside the formal banking system.

He added that the “temporary cash shortages” were also being accelerated by Zimbabweans’ refusal to embrace plastic money.

But, former Finance minister Tendai Biti said yesterday that the present cash shortages could only be addressed if authorities identified the root causes of the hiccups.

“Look, there is need to examine and determine what has caused the shortages. The issue is that the economy needs a stimulus package, an emergency reviving fund if you may call it that,” he said.

Biti, who now heads the People’s Democratic Party (PDP), said there was also need to strengthen the central bank.
“At the rate at which things are going, there is need to strengthen the Reserve Bank of Zimbabwe so that it will not be abused.

“There is also need to, as a matter of emergency, ensure that government curtails its expansive fiscal policy. Or, as I used to say, they need to eat what they kill. They are spending too much and this is not helping the current situation,” he said.

According to the Bankers Association of Zimbabwe’s Charity Jinya, while the maximum limit is $1 000, banks can only release cash to their customers based on their capacities.

Independent analyst Issis Mwale said there was need for the government to “find a way around the productivity issue for cash to start circulating again”.

“If anything, the situation has been steadily worsening and people are increasingly getting agitated.

“If the government does not want matters to get toxic, there is need to urgently address the matter. Whatever they are going to do, they need to act fast and now,” Mwale said, adding that the cash situation was stirring political unrest.-Daily News

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