CONTENTS | ANB-BIA HOMEPAGE | WEEKLY NEWS
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Zimbabwe |
SOCIAL CONDIT.
Zimbabwe’s banks face new challenges
as they strive to overcome a cash crisis that many believe has been brought
about by the high level of inflationLangton Nyagumbo says he’s been in the cash queue since 4 o’clock this morning. It’s now 12 noon but he’s still not been able to get hold of any cash. The bank authorities say they’ve run out of money. On a lucky day, Nyagumbo gets Z$5,000, hardly enough to buy basic commodities. People queue for hours to receive huge wads on rationed bank notes, not worth very much. Until the cash situation improves, individuals get a paltry Z$5,000.
Zimbabwe’s banks face new challenges as they strive to overcome a cash crisis that many believe has been brought about by the high level of inflation. The country’s banking sector — once the bastion of the economy — is facing its toughest challenge due to the money squeeze now in its second month (August). The problem is affecting production at work places, as workers spend almost every day queuing for cash.
Despite government claims that it has injected vast amounts into the banking system in June, there’s been nothing to show for it, thus prompting the government to come up with new measures in early August. (At the time of writing, fresh amounts of money have failed to appear in the formal banking system).
Why the crisis? – Many theories have been advanced trying to explain the cash crisis. Some experts say that huge amounts of Zimbabwean currency have «disappeared» into neighbouring countries — cross border informal traders and dealers being the main culprits. Others say that Zimbabweans living abroad are not sending enough foreign currency back home.
Emmanuel Doroh is an economist with the Zimbabwe Financial Holdings. He says Zimbabwe’s banking sector is threatened with collapse as a result of the shortage of cash, because ordinary people no longer have confidence in the banking system. He says the cash crisis has been fuelled by inflation — presently standing at nearly 400%. Increasing inflation has necessitated the introduction of high-value bank notes — the Z$50 dollar note in 1994 and the Z$100 dollar note in January 1995.
Financial analysts are unimpressed by the austerity measures put in place by the government, saying they are inadequate and flawed. Announcing the measures in late July, the Finance and Economic Development Minister, Dr Herbert Murerwa, said the cash shortage had been caused by the government’s failure to print enough money to match high inflation levels. Dr Murerwa said that from August onwards people have been banned from taking local currency outside the country. The central bank introduced traveller’s cheques to reduce the demand for cash.
But Doroh says that as long as inflation is not checked, printing more money will not solve the cash crisis — it will simply fuel inflation. Spiralling food prices are putting the price of staple food items such as mealie meal and bread beyond the reach of many. A loaf of bread that cost Z$100 a few months ago, is now more than Z$1,000. – It looks like Langton Nyagumbo will have many a long wait in a queue for cash!
- Tonderay Mukeredzi, Zimbabwe, August 2003 — © Reproduction authorised, with usual acknowledgment