Africa Banking Commodities Economy Zimbabwe

Zimbabwe: ‘Financial Indiscipline to Blame for Cash Shortages’

Endemic financial indiscipline in Zimbabwe has resulted in money being treated as a commodity instead of a medium of exchange and is one of three major reasons the country is currently battling chronic cash shortages.

Newly appointed Reserve Bank of Zimbabwe Deputy Governor Dr Jesimen Tarisai Chipika said bond notes were no longer an internal medium of exchange with hordes of the surrogate currency being stashed in homes or shipped to border posts and regional countries.

She said this last Friday while addressing Professional Women, Women Executives and Business Women’s Forum, which advances the interests of women and seeks to help them participate in the mainstream economy through starting their own enterprises.

“There is financial indiscipline in Zimbabwe and I think part of it was picked from the era of ‘burning’ (arbitrage in currency trading). Money is now being treated as a commodity, instead of a medium of exchange. Basic economics say that money is a medium of exchange. If we have an economy driven by the parallel market for currency, we are destroying ourselves. We have a problem, because we are drifting back to the era of burning currency, where we also did not bank, but stashed money at home.

“We have been told that the money which we are saying is in shortage, be it bond notes or otherwise, is all stashed up at the country’s border posts. We have been told by our financial intelligence that the bond notes are now hard currency within the Sadc region.

“The currency is now accepted as legal tender in countries such as Zambia, Mozambique and South Africa. When we introduced it, we only meant it as an internal currency to help us in transacting and as incentives for exporters,” she said.

“As such, a lot of dynamics are happening in our country and we have since invoked the Bank Use and Promotion Act, which many people had forgotten about, to say as business people you must take all your daily cash receipts to the bank,” she added.

Dr Chipika said all daily proceeds of business and idle cash should, as per requirements of the law, should be banked in order for the money to circulate in the economy since Zimbabwe was not printing money and used foreign currencies to transact.

She also pointed out that expenditure by Government, of financial resources not yet available was one of major causes of the prevailing cash shortage.

“One of the major problems causing the cash shortage in Zimbabwe is deficit financing. Deficit financing in an economy can be in the form of expenditure patterns of Government, in our companies or by us as individuals.

“Deficit financing, if its Government, it pays civil servants based on money which is not there and so, it approaches the Reserve Bank for overdrafts or it issues Treasury Bills. It’s not only Government guilty of such, even companies, they obtain overdrafts of money that is not available and use it to pay salaries,” Dr Chipika said.

Such a scenario, the central bank’s second in command said, puts pressure on banks to meet huge demands for cash when the financial institutions do not have the funds.

Source: allAfrica

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