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Currency Limbo: Zim Cash Crisis Worsens, Banks Reduces Withdrawal Limits

HARARE – Zimbabwe’s severe cash crisis is worsening, forcing banks to reduce further their daily withdrawal limits — in addition to suspend...

HARARE – Zimbabwe’s severe cash crisis is worsening, forcing banks to reduce further their daily withdrawal limits — in addition to suspending dispensing money through Automated Teller Machines (ATMs).

This prompted analysts who spoke to the Daily News yesterday to say that this confirmed that the local economy was dying and “hurtling towards total collapse”.

It also comes as most banks are now disbursing a maximum of $30 dollars a day, down from their usual $100 — while those that had capped the maximum withdrawal limit at $500 a week have pulled this back to $200.
Cash Crisis Deepens in Zimbabwe 

The cash shortages are also continuing to worsen despite the recent opening of the tobacco marketing season, where more than $47 million worth of the leaf has so far been sold.

Economic advisor to President Robert Mugabe, Ashok Chakravarti, told the Daily News yesterday that the escalating cash crisis was a result of “long-term problems” that came after the country opted to have one of the world’s strongest currencies, the US dollar, as its anchor currency.

“We have close to $6,5 billion in deposits and at the end of January we had a little over $300 million in cash circulating.

“Under such circumstances, it only makes sense that we have shortages. Do not blame the banks, it is not their fault, they are only looking for a coping mechanism,” Chakravarti said.

He recommended that the government should adopt the South African rand and ditch the dollar.

“I have said this before, we need a weaker currency. The weaker, the better for us. As South Africa has just been downgraded, this is an opportune time. What we just need is a weaker currency,” he added.

Veteran economist John Robertson said the cash problems were going to persist until the government urgently fixed the country’s economic fundamentals.

“This has been going on for the past year and in my view, the situation is not likely to improve in the near future because economic fundamentals remain the same.

“Government’s wage bill still makes up the majority of deposits and as soon as those deposits are recorded, civil servants want to withdraw the money. But there is essentially no money in the system . . . Not even tobacco earnings will save us this time” Robertson said.

The Reserve Bank of Zimbabwe (RBZ) increased the bond notes withdrawal limit from a maximum of $150 a week to $100 per day, and $300 per week towards the end of last year. It has so far injected $102 million worth of the surrogate currency into the system.

The cash shortages come as there are growing fears that the country’s economy may soon hit the disastrous lows of 2008 — as bond notes continue to lose their value against the United States dollar, with the coveted greenback now almost completely unavailable on the open market.

At the same time, economists have previously told the Daily News that poverty levels in the country are skyrocketing, with average incomes now at their lowest levels in more than 60 years — and with more than 76 percent of the country’s families now having to make do with pitiful incomes that are well below the poverty datum line of more than $500.

Mugabe and his warring ruling Zanu PF, in power since Zimbabwe’s independence from Britain in 1980, stand accused of turning the once-thriving local economy, which at one time was regarded as the bread basket of Africa, into a much-derided basket case. - Daily News

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