Zimbabwe: High US dollar demand stokes exorbitant bank charges

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Banking institutions in Zimbabwe have been accused of taking advantage of a cash shortage and are charging depositors high service and withdrawal fees, in the latest economic crisis to hit the southern African nation.

Some banks charge up to $20 a month service charge and up to $4 per transaction at a cash machine, while withdrawals in the banking hall can cost up to $10.

“At the moment the challenge is that the cost of swiping is too high”

Banks have capped withdrawal limits between $100 and $500 per day. Some have suspended interbank transfers.

Zimbabwe’s banking institutions make the bulk of their profits from bank charges when ordinarily they are supposed to be making money from interest income, which is their core business.

Lending has declined, as the economy stalled and defaults rose.

The Reserve Bank of Zimbabwe (RBZ) has had to intervene and force the banks to reduce charges and interest rates on loans, but with a liquidity crisis, the financial institutions say this is the only way they can survive.

Barclays Bank Zimbabwe managing director, George Guvamatanga, admitted this week that bank charges were too high.

In the face of the current cash shortages, the public has been encouraged to use their bank cards at point of sale machines. However, most people prefer cash due to the high charges levied for using cash machines.

“We are encouraging everyone to swipe, but at the moment the challenge is that the cost of swiping is too high, and as bankers we certainly need to look at that urgently,” Guvamatanga said.

Lowly paid civil servants and pensioners are the hardest hit due to multiple withdrawals, which attract high charges.

Long, winding bank queues, once a feature in the hyper-inflation era of 2008, have returned to haunt Zimbabweans, as cash shortages bite.

Six years ago, the southern African nation ago dumped its inflation ravaged local currency, adopting a basket of foreign currencies expanded over time to nine, among them the US dollar, South African rand, Botswana pula, Japanese yen, and the Chinese yuan.

But the central bank on Tuesday admitted that the multi-currency system was effectively dysfunctional.

“There has been a shift from the multi-currency in 2009 to the US dollar in 2016. We have put all our eggs in one basket now, which is why the demand for the US dollar has increased,” RBZ governor John Mangudya told a public meeting.

In May, the central bank announced the introduction of bond notes – a locally printed currency pegged to the US dollar – as part of a raft of measures to promote exports and ease cash shortages.

Source: The African Report