As citizens watch the bank queues and empty ATMs while they are unable to access cash in the bank, they have resorted to electronic transfers using credit cards and mobile money transfers for local payments.
The RBZ has in the past been trying to promote increased use of electronic payments (“plastic money”) without success, but now it seems to be succeeding.
The policy is working, but firstly, it is estimated that banks were early this year holding deposits worth US$4 billion and although there are no figures of how much has been withdrawn from banks this last month, it is small on account of limits set for daily withdrawals.
Nevertheless, there is evidence that inflows are lower than outflows – leaving fewer resources to cover local electronic payments; and certainly inadequate for foreign payments.
Secondly, electronic payments will continue to have a positive impact until customers try to turn the transfers into cash and they find out that they cannot – and the downward trend will set in.
As long as daily withdrawal limits are low and exporters continue to bring US$ into the economy through the RBZ, some resources will remain available to cover local electronic transfers. This is the economy the RBZ can keep an eye on and regulate, but it is bound to be a declining economy as outflows continually exceed inflows.
With the Bond Note promised for October 2016, the theory is that this local money will stabilize the official economy by fuelling it with money that cannot be converted into external US$. This scenario assumes that those selling goods will continue to accept the bond notes and will not devalue it to the extent of the currency becoming a liability.
The prognosis does not look good. Already, the market is charging anything up to 15% on US$ cash for those wishing to lay their hands on hard cash in exchange for bank electronic transfers. With the Rand having suffered a similar fate since it hit the skids and depreciated, it is difficult to see how a bond note backed by US$200 million in a US$12 billion economy can avoid the fate of a Rand backed by a US$330 billion economy or even the US$ backed by an US$18 trillion economy.
Back in 2008 when there was a local cash shortage in the market, the cash premium was so high that an electronic transfer of Z$ for US$100 at the parallel market rate was enough to purchase a new pick-up truck worth $20 000 from the RBZ at the official Z$ exchange rate.
It would be prudent to assume that the official economy will decrease rapidly during the remainder of 2016 unless new market-driven monetary policy measures are put in place; and bureaucratic-driven policies could even accelerate the decline in the official economy.
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