Cash Exhausted At Some Zimbabwean Banks As Financial Crisis Stretches On
A growing chorus was demanding why the Reserve Bank had failed to print enough notes to meet the needs of the economy through the holid
The cash drought that afflicted Zimbabwe over Christmas remained severe on Friday 10 days after the governor of the Reserve Bank of Zimbabwe announced a currency shuffle he said would relieve shortages but has left many Zimbabweans without the means to make the most elementary of purchases during the holiday period. In Harare, the capital, large financial institutions such as First Bank, Intermarket and Agribank appeared not to have cash to dispense to customers. Building societies, or savings and loan institutions, where most low-income Zimbabweans save, were the hardest hit, with long lines of cash-seekers visible late Friday afternoon. Some banks were giving customers the Z$200,000 bearer cheques - central bank promissory notes which have stood for currency in Zimbabwe for years - although the notes, until recently the largest in circulation, are scheduled to expire on Monday. In eastern Mutare long queues were visible at all leading banks, which were allowing individuals to withdraw Z$20 million, or about US$10 at the parallel market exchange rate. Companies were allowed cash disbursals of up to Z$100 million. Meanwhile, a growing chorus was demanding why the Reserve Bank failed to print enough notes to supply the needs of the economy. Others criticized Reserve Bank Governor Gideon Gono for failing to issue larger denomination bearer cheques. Sources close to the central bank said its financial printing arm, Fidelity Printers, was unable to produce enough notes to keep up with accelerating hyperinflation, and that the printer had run short of the special paper and ink it needs to produce notes. On the political side, officials reported a bitter debate between the central bank and the cabinet as to how to resolve the crisis. They said the bank wanted to print notes in denominations of Z$10 million, but ministers were adamant that this would signal economic failure, an unacceptable move with elections coming up in 2008. Central bank officials also seemed to have lost sight of the order of magnitude of the amounts involved. Officials made much of a “cash baroness” arrested in possession of Z$10 billion, but on the parallel market this amounted to just US$5,000. The Reserve Bank tried last week to resolve the crisis by injecting Z$20 trillion into the financial system. But at the prevailing parallel market exchange rate this amounted to only about US$10 million to meet the needs of the Zimbabwean economy. The opposition blamed RBZ chief Gono for the failure of the currency operation. Deputy Spokesman Elton Mangoma of the Movement for Democratic Change faction led by Morgan Tsvangirai said the central bank governor had sought scapegoats in “imaginary enemies of the state,” but should shoulder responsibility for the crisis and recognize that ordinary citizens have suffered greatly because of his policies. Many others asked how the functioning of the economy and the banking system could go awry as it has, stranding many Zimbabweans in the midst of the holidays. Gono rolled out "Operation Sunrise II" last week aiming to relieve the cash crisis and take control of the cash economy back from what he calls the “cash barons.” But the result has been to stop the economy in its tracks, causing massive dislocation.