The cash crisis currently affecting the country is set to end soon following the unexpected introduction of new higher denomination bearer cheques and the setting of new daily maximum withdrawals by the central bank.

Reserve Bank of Zimbabwe (RBZ) governor, Gideon Gono on Wednesday caught Zimbabweans unaware, introducing the $1 million, $5 million and $10 million notes which are expected to be in circulation today (Friday).

The governor went on further to announce the daily cash withdrawal limits for individuals and companies, which have been increased from $50 million to $500 million per day. This measure also takes effect today.

In his address, Gono said the central bank recognises the plight of the majority of depositors and the general public as they seek to carry out their genuine day-to-day transactions.

"The measures taken are meant to provide relief and convenience to the transacting public."

"We are confident that the above interventions will eradicate the prevailing queues, freeing up people to concentrate on gainful productive activities," said Gono.

The cash shortage has prevailed for almost a month and despite the recent injection of new bearer cheques of $750 000, $500 000 and $250 000, and the extension of the $200 000 note lifespan, individuals and firms still find it difficult to access cash from their bank accounts.

Queues can still be seen at each and every bank in and around the country. In the capital Harare, some banks are reported to be running out of cash whilst some are allowing clients to make a mere withdrawal of $10 million per day.

Speaking to The Zimbabwe Gazette, Economic consultant John Robertson says though this development won't make the state of the economy any better, bank queues are likely to disappear quickly as people will be once again, able to access their money.

"This is going to be very easy for the government especially when it comes to the printing of the new notes."

"Printing will be done in a short space of time owing to the larger denominations," he said.

"In this regard, the central bank will continue to formulate and implement tangible solutions to the challenges that the financial sector is currently facing, for the benefit and convenience of the public," says Gono.

An analyst with a local bank says owing to the increased daily withdrawal, many individuals will make only one withdrawal per month considering the salaries earned by most Zimbabweans.

"In reality a large population take home less than $200 million, if not $100 million. So, if a person takes their money today, they will not return the following day thereby easing the bank queues," he said.

According to the RBZ, surveys indicate that high inflation and frequent salary adjustments tend to accelerate the demand for cash, as employees would want to immediately convert their earnings into cash to allow them to buy goods and services ahead of anticipated future price increases. The critical learning point from this is to continuously align cash withdrawal limits and currency denominations to anticipated changes in prices.

Robertson says however, especially taking note of the new $10 million note, Zimbabwe is not yet the worst in history.

"Many countries in South America in their time of recession had notes exceeding 10 million (in their currencies)."

"The most recent one if Yugoslavia which had a billion dollar note," adds Robertson.

The central bank has also outlined its causes of the cash shortages which entail hyperinflationary pressures, periodic rise in demands-school fees/elections, parallel market activities for forex, fuel, basic commodities and corruption/smuggling of minerals, fertilizers, etc.

Sub-economic national policies in the area of subsidies especially with regard to forex, fuel, grain and fertilizer purchases that are creating room for price-arbitrages which benefit only a few with access to such commodities, long judicial back-logs, weak prosecution and lenient sentences to offenders, sanctions and their impact on money printing facilities, low denominations relative to demand for cash and inflationary pressures and size of the national budget.

---

Share This Story On:

Average user rating

Display 1 of 1 comments