Zimbabwe’s central bank clutching at straws


The message on bank notes is clear and simple. “I promise to pay the bearer on demand (amount) for the Reserve Bank of Zimbabwe,” it says. But no one is paying any attention to that. As far as people are concerned, once they have worked for their money, it is theirs, and no one, including the central bank, can tell them what to do with their money.

This is the hard lesson the Reserve Bank of Zimbabwe has learnt and it is now literally clutching at straws. It has failed to solve the local currency cash crisis for more than three months. All the measures it has introduced have flopped.

It has failed to control the flow of foreign currency for more than nine months. Instead of getting more after introducing stringent measures and closing down bureaus de change in November last year, it has been getting less and less foreign currency. It has even withdrawn NMB Bank’s foreign currency trading licence but market watchers say this is likely to change very little.

One analyst said the central bank was only treating the symptoms and was not addressing the cause of the disease. Demand is simply outstripping supply. The central bank has no foreign currency reserves. So no matter what it does, as long as it is unable to pour money into the market to improve supply, it will not solve the speculative behaviour in the market.

Lack of foreign currency is, to some extent regarded as a luxury because most average Zimbabweans do not have access to it. But the bank’s failure to address the shortage of local cash has hit the average Zimbabwean hard. People need cash for their daily needs- bus fare, money to buy milk and bread, if they can still afford it, and lunch at work even if that has been reduced to buns.

And there is nothing more frustrating that queuing on end for your money only to be given an amount not enough to get you home, especially when the bank, which owes you the money charges you for withdrawing that little and continues to charge you every time you withdraw a small amount.

Sources say that the central bank knew about the shortage of cash more than eight months ago, but just sat and did nothing. Observers say if it had introduced the big denomination travellers’ cheques then, when cash was still available especially for the average Zimbabwean, they might have become acceptable when the cash crunch came. Introducing them as a desperate measure did not work because though they are regarded as cash, they can never replace hard cash.

What has been more disheartening is that after failing to convince the public to accept travellers’ cheques, which could end up as another expense since the central bank could simply have printed more cash instead of TCs, it went on to pressurise people to bank their money with the same banks that were “refusing” to give people their money back.

New measures introduced by the central bank, though quite stringent and good on paper, are very difficult to implement. Even if the entire police force were to be put at the disposal of the central bank, they would not be enough to police Harare alone to implement the new measures announced by the bank.

Some of the measures announced by the bank are that businesses should not keep in excess of $5 million. They should bank all excess cash. Travellers are no longer allowed to take any local currency out of the country.

As one company executive said these measures can only turn honest citizens into criminals. People are not banking their money because they have lost faith in the banking system. If you put your money in the bank, you will not get it back when you want it. Period. How then can the central bank force people to bank their money when it does not even know their turnover or how they get their money. The central bank should first of all investigate how so much money was siphoned out of the banking system in the first place. Because cash is definitely available for those who want to pay a premium.

Highveld Financial Services said the Zimbabwe dollar now had an exchange rate and was trading at anything between 1.25 and 1.45. Some banks are offering commissions of between 15 and 20 percent for those banking huge amounts of cash such as bus operators, retail chains and supermarkets. Some shops are giving discounts of up to 15 percent for those who buy in cash, especially when people are buying items that cost thousands of dollars.

Once again, the shortage of cash has been reduced to supply and demand. As long as the central bank is not able to print and supply enough bank notes, the crisis will continue. But watchers say it is not because the government or officials have no solutions, they just don’t have the will to solve the problem.

There is wide-speculation that those responsible are not seeking a quick solution because they, or their close associates, are making money from the crisis. One commentator even quipped: “Why does our government think that there has to be a task force to solve any problem the country is facing?”

Indeed, why? When we had a food crisis, a task force was set up. To indigenise the economy, a task force was set up. A task force was also set up to ensure the agrarian reform was smooth. A task force was set up to try to solve the fuel problem. A task force was set up to implement price controls. Now there is a task force to solve the cash crisis.

None of the task forces has solved any of the problems it was set up to solve. Instead, members of the task forces have joined the band wagon and cashed in on the crisis.


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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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