GOVERNMENT’S RESPONSE
In a bid to arrest the problem, the RBZ imposed cash withdrawal limits in May 2016, while reducing the cost of electronic banking.
Government has also sought to improve the country’s export performance, while throttling imports.
As a consequence of the crisis and government’s measures to promote alternative payment methods, the central bank says about 95 percent of all retail transactions are not going through electronic channels.
However, the most significant move taken by government in response to the bank note crisis has been the introduction of a parallel currency – bond notes and coins – in a bid to ease the shortage of physical currency. The ‘bond’, which the central bank says is not a currency but a financial instrument, is pegged at parity with the United States dollar, although it trades at a 20 percent discount against the greenback on the informal market.
The bond notes and coins derive their name from the bond facilities, advanced by the African Export Import Bank (AfreximBank), backing their issuance.
The central bank says it has so far issued $350 million in bond notes and $90 million worth of coins, against facilities worth more than US$500 million from the AfreximBank.
The introduction of the bond notes has shaken the banking public’s confidence in the financial system, further compounding the problem.
Despite the authorities’ protestations to the contrary, the introduction of the bond notes has stoked fears of a return of a local currency and the memories of a Zimbabwean dollar ravaged by hyperinflation.
As part of its response to the bank note crisis, the central bank has also stepped up the importation of physical bills, as reported by The Sunday Mail.
RBZ Governor John Mangudya says underlying economic fundamentals need to be addressed to end Zimbabwe’s bank note crisis
WILL THE CASH IMPORTS EASE THE CRISIS?
Last year, the central bank reported that it had imported US$100 million between January and June 2017, with private banks weighing in with US$40 million.
RBZ governor, John Mangudya, told The Sunday Mail that the central bank had scaled up its bank note imports in the first four months of 2018:
“I can say that we have imported cash of an amount of about US$400 million from January to the end of April. This is higher than what we did last year at around the same time,” Mangudya told the newspaper.
However, although the physical dollar imports have averaged US$100 million so far this year, compared to the monthly average of just over US$23 million last year, cash issued at automated teller machines (ATMs) has averaged $4.22 million per week in the first 18 weeks of 2018, compared to $13.44 million per week over the same period of 2017, according to RBZ data.
The data shows that cash access from ATMs averaged $56 million a week over the same comparative period of 2014, $71 million in 2015 and $69 million in 2016.
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