PRESIDENT Robert Mugabe last week made a rare admission that he had lost confidence in the country’s banking sector and that he kept cash at home.
The remarks courted criticism from various sectors, with many arguing that the President was such a powerful man that he could easily get cash from any bank.
Of course the suggestion is that if the country’s top civil servant can have such a nightmare with cash withdrawals from his own bank, then it should be worse for the ordinary depositor. Indeed it should be.
The cash crisis that started last year and has shown no sign of abating has inflicted such damage on public confidence in the banking sector that it will take a very long time to restore.
Public confidence in the banking sector has been gravely affected by the fact that depositors have been unable to withdraw their money from banks on demand.
To go around this problem, the Reserve Bank of Zimbabwe (RBZ) introduced a form of money, it however, denies to be real currency, the bond notes, which have been circulating since November last year.
The introduction of bond notes has in fact driven out hard currency, predominantly the United States dollar, from circulation. Commodity prices have also risen significantly in sympathy with the shortage of US dollars in the market.
Although officially the bond notes rank pari pasu with the greenback, it has been losing ground on the black market. Apparently, traders and other merchants who import their merchandise from outside the country are failing to get US dollar cash from banks, forcing them to resort to the black market.
Recently, the central bank also reported that deposits by Zimbabweans in offshore banks had increased.
We believe that the policy decisions to deal with the cash crisis were faulty in many respects and are discouraging not only banking of US dollars, but also promoting Zimbabweans abroad to open bank accounts in other countries.
We have lots of professional Zimbabweans in countries such as Afghanistan and other places who were routing cash to relatives through the banking sector. Others do consultancy work which is paid for through normal banking channels.
However, this lot of people have been excluded from incentives paid to people receiving their cash through money transfer agencies. Moreover, they have been getting paid in bond notes, while those receiving their cash through money transfer agencies get theirs in hard currency. This has forced many to open bank accounts for themselves and their relatives in South Africa and elsewhere, prejudicing the country of potential earnings.
We are gratified by the fact that the central bank has acted on a number of concerns that have affected public confidence in the banking sector, such as the exorbitant bank charges, but there is still more the RBZ should do to foster confidence and return the economy to normalcy.
President Mugabe indicated that a Zimbabwe dollar is a no, no, no. Bond notes are a form of local currency and their usage has a risk that has resulted in the current spate of price hikes.
It may not yet be too late for government and the RBZ to reconsider their policy around incentives and bond notes.