The country has been experiencing a cash crunch since November last year due to a widening trade deficit – currently hovering over $3 billion – and illicit financial inflows, a situation that has seen queues surfacing at banks reminiscent of the hyperinflationary period.
Information gathered by the Daily News show that bank tellers and other foreign currency dealers are preying on locals who are failing to access their cash trapped in banks. The illegal dealers, most of whom thrived under the 2008 economic crisis, are charging between 5 and 10 percent for electronic transfers in return for hard cash.
A dealer who spoke to this publication yesterday said he was using his banking connections to access cash from local financial institutions, which is then sold for a premium to those in desperate need of the scarce commodity. “I see myself as an entrepreneur who is helping people to have instant access to cash which might have taken them two to three weeks using normal banking channels,” said a dealer only identified as Diva.
This comes as the Reserve Bank of Zimbabwe recently imposed daily cash withdrawal limits of $1 000 to ease the current cash-crisis that has seen people queuing for days on banks to access their hard earned monies. Economic experts say the central bank’s decision to introduce bond notes “within the next two or three months” has worsened the liquidity crisis as depositors are frantically withdrawing their money fearing a return of the Zimbabwean dollar.
The country adopted a basket of currencies in 2009 to replace its discredited local currency which had been rendered useless by hyperinflation. Most people – including pensioners – lost their life time savings during the currency conversion and the memories are still fresh in the minds of many. Bank tellers are also taking advantage of their positions and are demanding at least 10 percent to help depositors get cash above the daily cash withdrawal limits.
On Wednesday, central bank governor was taken to task by industrialists for his stance to introduce bond notes at a time when the economy was not ready to embrace local currency. University of Zimbabwe economics lecturer and government consultant, Ashok Chakravati, said the move to introduce bond notes was “unnecessary.”
“Other countries have been in import deficit situations before and history has shown us how export bonuses are awarded without instilling panic in fragile nations. “An export bonus is appropriate, especially in a country with no way of devaluing the currency like Zimbabwe, but the bond notes route is very unnecessary,” Chakravati said. The veteran economist advocated for government to “follow a basic economics route”
“The obvious solution here would be to import tax across board for us to finance exports on fiscal devaluation; a three percent across board import tax would do the trick. “This will reduce imports that will give incentive to exports. Introducing bond notes the absolute wrong way to go about it,” Chakravati said.
Businessman Lovemore Mukono said the government did not have the “right to introduce new money” without consulting stakeholders.
“Government needs to reconsider printing any money that has a Zimbabwe bird before we agree. We do not want to have a situation in which people brag to us that they are using our money as toilet paper again. We, as business want assurances that the over-printing horrors of 2008 do not happen,” he said.
Prominent businessman and local holder of the Mugg & Bean and News Café franchises Shingi Munyeza also added his two cents, saying government had to cut its own expenditure before adopting “drastic actions such as the bond notes” “We have established that one of the main reasons why we are in this mess is that the government is over-spending. Why then is government not quickly plugging the hole and leave within its means?” Munyeza said, also saying government had to limit its printing of Treasury Bills.
On Monday, Munyeza used micro-blogging site Twitter to query the bond notes move to his over 14 000 followers. “Can someone in treasury tell us what will happen to the billions in treasury bills now that we will start printing bond notes?,” the businessman tweeted, and earned 25 re-tweets on the platform.
Economist Brains Muchemwa highlighted that the bond notes should not be imposed on the market.
“Currencies have to compete for relevance, bond notes should not be imposed on the market. The market the right to reject the notes, it has that right. Besides, the market is not ready for such interventionist measures,” he said. “The country’s history has shown that control measures do not really work in this country. Every time stringent controls are enforced there is always resistance from the market,” Muchemwa added.
IT News Africa