The government’s hidden hand in Zimbabwe’s cash crisis


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In October 2008, at the height of the hyperinflation era, former Reserve Bank governor Gideon Gono described the RTGS system as “a vehicle for illicit foreign exchange parallel market dealings that have distorted exchange rates beyond the wildest imagination.”

The system had been introduced a few years earlier primarily to stem cash shortages, reduce cheque fraud risks and delays in customer payments.

Analysts say government has been the transgressor this time, paying for the maturing TBs and interest payments through the RTGS and starving the market of cash.

But the government’s problem is that the RTGS cannot fund nostro balances or be used to import cash. Under proper banking conditions, the RTGS position simply reflects cash held in vaults by RBZ and the nostro balances in RBZ’s accounts held with external banks. If a bank needs nostro funding, it will request the RBZ to credit its nostro account against a reduction in the bank’s RTGS position.

Cash has always been imported from the nostro positions.

It raises the question of how the RTGS position got to where it is now.

One analyst says the TB maturities are being honored at a time when revenue collection is much lower than recurrent expenditure — Q1 figures show a 16 percent disparity between collections and target — and were being met by pushing figures not backed by real cash. This means there is not enough notes and coins to back bank balances, a situation which should not occur in a market that does not print the currency.

Opposition Member of Parliament for Bulawayo South, Eddie Cross, suggests the government is being more Machiavellian.

“In 2015 the RTGS system (money transfers through the banks) handled $45 billion dollars – $170 million a day. This demonstrates the speed at which money circulates in any economy. Now what happens in this system is that when you fill in an RTGS form at your local bank, the bank processes the documentation and sends it, with a wire transfer of funds from YOUR account, to the Reserve Bank. In 2015 your money sat there for an average of three days before onwards transfer to your supplier/creditor or other beneficiary. 3 days at $170 million a day – average money in the account at the RBZ $500 million,” he wrote on his blog last week.

“Now I believe that the only credible explanation of the sudden cash shortage is that when (Finance Minister) Chinamasa cannot balance his books at the month end and needs cash, he has been dipping into the RTGS account at the Reserve Bank – replacing the funds with a simple IOU. This is patently illegal and puts every bank at risk because, when the commercial bank takes real dollars out of your account for transfer you expect them (you trust them) to deliver at the other end.”

Faced with a cash crunch, the government has sought to bring back a localized currency to create financial mobility in the market in the form of “bond notes.”

Continued next page

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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