When the Zimbabwe dollar plummeted against the US dollar late in 2008, the government kept printing Zimbabwe dollar notes of higher and higher denominations – eventually running into trillions-until the Zimbabwe dollar notes became worthless.
So first the people and then the new inclusive government abandoned it and took on the US dollar and other currencies, including the South African Rand.
Now the US dollar is also running out and banks have limited withdrawals as have ATM machines which are now regularly spewing out dirty, dishevelled very old notes. And there aren’t enough of them to withdraw some from circulation to replace the new ones with.
Central bank governor John Mangudya appealed to the public this week to limit their use of cash and opt for plastic money.
“As the central bank, our key function is to ensure financial stability in the economy and that people are able to get their money when they want it. We are aware of the situation and the high demand for cash because of salary and bonus payments (for civil servants).”
He said that banks had been asked to increase cash imports, mainly US dollars. Zimbabweans used to use the South African Rand also, but have mostly rejected it as it devalued more then 30 percent over the last year.
“However, importing cash is not an overnight event.” he added. “It takes time but we are confident that the banks will be able to sufficiently meet the requirements of the banking public,” he told journalists in Harare.
Banks have limited maximum cash withdrawals to $500 (about R7,500) per transaction and have switched off some ATMs.
Tobacco farmers who began selling their crops last month are also not being paid out in cash. Thousands of them are small scale growers who have never had bank accounts. They largely produce lower grades of tobacco.
“I also urge people to use point of sale when transacting,” Mangudya said.
“It is a national responsibility for everyone; especially at a time we are not in a position to print money. There are local businesspeople that do not bank their daily takings, preferring to keep the money in safes at home, fuelling cash shortages,” he said.
Many Zimbabweans do not trust banks since the hyper-inflationary era, which began in earnest about 12 years ago. At the end even civil servants could not withdraw money from the banks and the Zimbabwe dollar became worthless.
When an inclusive government came to power in 2009 and formally abandoned the Zimbabwe dollar, the economy – and the banks – began to recover.
The latest crisis has been predicted by many economists for the last two years because Zimbabwe imports more then it exports.
Zimbabwe depends heavily on imports, even for food, and about 80 percent of goods on sale in most supermarkets are imported from South Africa, but often sell for double the South African price.
Zimbabwe’s finance minister Patrick Chinamasa says he is trying to ensure that Zimbabwe becomes eligible for a loan from the International Monetary Fund later this year.
To this end, the government has also begun to talk about reducing the foreign debt. It has recently begun talking with the thousands of white farmers whose land and capital goods, including houses and even personal effects, were taken, without compensation, by President Robert Mugabe’s supporters from 2000.
Observers suspect the government is just trying to placate the IMF.
The land grab crashed the value of the Zimbabwe dollar when tobacco exports, then the major foreign currency earner, dived.
Another reason for the current shortage is undercover export – smuggling – of US dollars from Zimbabwe to South Africa, according to members of the diaspora there.
“People are packing US dollars into cases and sending them across the border and making money in Rands,” said one well connected source.
– Africa News Agency