Zimbabwe’s economy is deep in crisis, and the rampant cash shortages could topple it over the edge.
The SADC country’s local currency tumbled by over 900% in the 12 month period ending January 2020. The decline in the last 6 months being the biggest contraction with the currency weakening from ZWL$10/US$ to ZWL$25/US$. Even worse is the fact that demand for notes and coins is way more than the actual amount of cash available in the market.
As of 30 December 2019, a total of ZWL$1 billion notes and coins, about 3% of total bank deposits, were available in the market. The fact that cash shortages keep persisting isn’t a surprise. Long cash withdrawal queues throng banks on a daily basis.
Consumers have lost confidence in the banking system preferring to save their earnings under a pillow than in a bank account. “There will always be cash shortages in the market because notes and coins are being diverted to the black market,” said one disgruntled consumer who had been waiting in a bank queue for over 3 hours to withdraw ZWL$100 (equivalent to US$5) .
“An additional ZWL$500 million in notes and coins will be put into the economy,” said Minister of Finance, Mthuli Ncube in an interview last month. A month later, the Reserve bank of Zimbabwe (RBZ) has confirmed that it has imported more cash and coins that will raise the amount of physical cash to 10% of bank deposits.
The RBZ governor, Dr Mangudya appears very optimistic about the performance of the currency despite the poor performance of the Zimbabwean dollar since its introduction.
“The country is well oncourse to de-dollarisation” he said during a press conference held earlier today on the 17th.