Reserve Bank of Zimbabwe Governor's Statement on Cash Shortages - 04 May 2016


1. The shortage of USD cash in the country as evidenced by queues at some banks and automated teller machines (ATMs) is attributable to a number of intertwined factors that include:
a. The dysfunctional multi-currency system as a result of the strong USD. In the case of Zimbabwe, the USD has become to be more of a commodity, a safe haven currency or asset than a medium of exchange.
b. Low levels of use of plastic money and the real time gross settlement (RTGS) platforms. Zimbabwe is predominantly a cash economy.
c. Low levels of local production to meet consumer demand, leading to higher demand for foreign exchange to import consumer goods.
d. Low consumer and business confidence as reflected by high appetite by both consumers and business to keep cash outside the banking system.
e. Inefficient distribution and utilization of scarce foreign exchange resources.

2. The strong USD continues to make Zimbabwe to be:
a. High cost producing country,
b. Very expensive tourist destination,
c. A fertile ground for capital flight and/or externalization, and
d. Dependent on the USD cash for almost all domestic translations. The USD has replaced all the other currencies in multi-currency basket, namely the Rand, Euro, the British Pound, Yuan, Pula, Australian Dollar, Indian Rupee and Japanese Yen.

3. The adverse impact of the above factors has continued to put pressure on the country's balance of payments position. Whilst the country experienced balanced trade prior to 2003, as exports were aligned to imports, the situation changed from 2004. Since then, the country has continuously experienced trade deficits, which have increased from moderate levels of around USD400 million during 2004-2006 to the unsustainable levels of USD2.5 billion between 2011 and 2015. The persistent trade deficits has continued to drain liquidity and/or cash from the country.

4. The commendable improvement in the production of gold and tobacco by small scale producers is also contributing to the current high demand for cash as these producers demand cash from their banks immediately after selling their produce.

5. Drought induced import requirements have also increased the competing demand for foreign exchange. To date, around USD80 million has been utilised for the importation of grain. The increase in these imports is at a time when the international commodity prices for Zimbabwe's main export items, gold, platinum and diamonds are depressed.

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