Civil service salaries drive cash crunch

Business Reporter
Monthly cash demand of more than US$200 million, especially by civil servants, is putting a strain on the supply of bank notes in the market, the Reserve Bank of Zimbabwe has said.

Though it was initially forecast that shortages would subside as the tobacco marketing season — which began on March 30 — kicked in, the transacting public still finds it difficult to access cash.

Cash rationing, where financial institutions limit withdrawals to as low as US$20 in order to service as many depositors as possible, is becoming the norm.

RBZ Governor Dr John Mangudya told The Sunday Mail Business last week that the central bank was digging deep to ensure cash demand was met.

“We are advising that queues for cash at banks occur mainly on Government paydays as Government employees convert their virtual earnings into physical cash.

“This mismatch (of physical cash demand) is the one causing queues at banks as banks and the Reserve Bank would be required to find and or import foreign exchange cash to meet the physical cash demands for Government and other sectors’ employees.

“Government is the biggest employer in the country and its employees need cash demands of more than US$200 million monthly.

“We hope the continuous unavailability of high value denominations of US$50 and US$100 bills will mitigate against money laundering and capital flight,” said Dr Mangudya.

The hardest hit banks are POSB, CABS, FBC, ZB Bank, and to a lesser extent CBZ, all of which have huge client bases.

Banking sources said last week Standard Chartered, Stanbic, Barclays and MBCA banks were no longer importing cash for fear of depleting their nostro balances (offshore accounts).

The central bank says continued use of 80 percent of State revenues on recurrent expenditures, particularly civil servants’ salaries, is unsustainable.

Dr Mangudya said, “As we speak, we continue to import a maximum of US$60 million through smaller denominations of US$10 and US$20. All we want is to ensure that Zimbabwe becomes a cash-lite society by year-end and ensure that sales transactions increase from 60 percent to 90 percent.

“This policy direction is critical in order to minimise mismatches between cash and virtual money and for preserving foreign exchange in nostro accounts for foreign payments.”

The RBZ has directed banks to slash bank charges to make alternative payment platforms more attractive.

Electronic funds transfers attract charges of between USc33 and US$2,10. Fees for real time gross settlement transactions have been capped at US$5. POS transactions of up to US$10 attract a charge of USc10; while those above that attract a fee of USc45.

POS own-bank customer charges are USc20, while POS issuer charges have been removed.

Maximum fees for making withdrawals at ATMs are pegged at US$2,50; while merchant service commission ranges from zero to 1 percent for local transactions. Monthly administration or service fees range between zero to US$5 for individuals.

By the end of 2016, 32 540 POS machines and 40 590 agents had been deployed across Zimbabwe.

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