Mugabe currency shortage causes cash crisis
Zimbabwe dipped deeper into financial crisis as the government outlawed the hoarding of cash which is causing a currency shortage.
The four-month-old economic calamity has seen thousands of workers flood banks, desperate to draw cash salaries. Starved of currency, travellers’ cheques have now become legal tender.
With inflation and economic insecurity already running rampant, many blame the socio-economic situation on President Robert Mugabe.
In his address to parliament last month, Mugabe said there was a need to cut interest rates to “recharge this economy in ways that encourage real wealth generation as opposed to speculative wealth”.
Unemployment has skyrocketed and inflation has reached one of the highest rates in the world at 365 percent.
But Finance Minister Herbert Murerwa says the increase of non-cash transactions, and hoarding of cash, “has led to a shortage of cash which adversely affects the banking system.”
Analysts blame the cash shortage on the Bank’s inability to print enough notes to match inflation and on interest rates for deposits at a tiny 15 percent which discourages saving in banks.
Murerwa said last week the central bank was printing some Z$700 million a day.
The government has already set a September deadline to abolish the highest denominated Z$500 note, which the government says is being hoarded for black market trade.
Zimbabwe will put into circulation a new Z$500 note at the end of September and introduce a Z$1,000 note in October.
The Reserve Bank on Friday introduced local travellers’ cheques for daily purchases, and commercial banks began distributing them on Saturday.
An American dollar currently buys 3,700 Zimbabwe dollars on the black market. This is up from Z$300 in March 2002 when Mugabe won elections branded unfair by Western countries.
Mugabe has been the leader of Zimbabwe since 1980, when Zimbabwe achieved independence from Britain.