Zimbabwe: Cash Crunch Hits Banks

A biting cash shortage has forced banks to lower their daily automated teller machine (ATM) withdrawal limits from US$3 000 to US$800, the Zimbabwe Independent can reveal.

A snap survey by this paper found that some locally owned banks had long suspended dispensing cash at most of their ATMs, with a government-owned financial institution going without ATM transactions since the festive season in an effort to manage the cash shortages.

Banks have also suspended interconnectivity through ZimSwitch, an electronic payment platform for local banks, at their ATMs or for specific banks.

A top banker confirmed banks had suspended transactions on ZimSwitch to reserve cash only for their customers.

"It takes time to import cash and feed into the system and at the same time it takes time to export cash and fund your nostro accounts. What we are simply doing as banks is we are saying let's stop giving money to everyone with a ZimSwitch ready card and preserve it only for our internal clients until the situation normalises," said the banker.

The Zimbabwean market traditionally experiences cash shortages during the festive season when civil servants, who constitute the bulk of the formal workforce in the country, get their December salaries plus their annual bonuses.

However, the situation was worse last year starting late November to date.

Information gathered from banking sector sources shows that banks are treating the cash shortages as a mere operational issue affecting individual financial institutions and not the industry.

In December, a number of banks were unable to make telegraphic transfer remittances to foreign destinations for values as little as US$1 500.

At the time, sources in the central bank said banks were struggling to avert a cash crisis due to the liquidity crunch exacerbated by dwindling exports that have forced financial institutions, in some instances, to physically repatriate cash in order to deposit into their nostro accounts and fund foreign telegraphic transfers.

The central bank sources said companies in Zimbabwe were not exporting, hence banks had no funds in their foreign accounts. At best, the financial institutions were only able to do telegraphic transfers in South African rand because of their relationships with intermediary banks domiciled in South Africa.

"I was at my bank today and these guys told me I could only withdraw US$800. They also said they have run out of higher denominations and could only give me cash in US$20 denominations or less," said one customer at a bank in Harare yesterday.

Efforts to get an official comment from RBZ governor John Mangudya on the state of cash supply in the market were fruitless as his mobile went unanswered.

Zimbabwe adopted a multiple currency regime that is dominated by the US dollar in 2009 after a decade of hyperinflation and economic stagnation. The Zimbabwe dollar was demonetised last year.

SOURCE:ZIMBABWE INDEPENDENT