The money that has been injected into the economy is sufficient enough to cover depositors’ needs and the apparent excess demand for cash could be due to speculative purposes, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said.
BY TARISAI MANDIZHA
Zimbabwe has been experiencing liquidity constraints with depositors stranded as banks fail to meet demand.
Appearing before a parliamentary portfolio committee on Budget, Finance and Economic Development on Friday, Mangudya said low confidence in the banking sector had also seen people shunning banks.
He said the speculative purpose of cash which was on the rise, was due to low confidence in banks.
“If people think their money is not safe in the banks, they take it away.
“In our case, we do believe sincerely that the transactional and contingency purposes of money is sufficient in this economy but the third aspect — the speculative purpose — is due to demand, policy or confidence,” he said.
“We know the amount of money that we have imported over the past three months, and we are aware that amount under normal circumstance is supposed to be sufficient for this economy but we have noticed there is excess demand for cash.”
Mangudya told the committee, which is chaired by Zanu PF legislator David Chapfika, that RBZ had injected $145 million into the economy over the past three months.
He said RBZ had also imported $118 million to ease the cash challenges.
“As the RBZ, we have injected $145 million over the past three months from January 1 to April 6 that has got into the market but that money, we don’t think it’s circulating in the way it should circulate.
“Also, we are importing more cash to ease the demand. Unfortunately, it is not done overnight, it needs time, placing an order can take a week from ordering until intervention,” he said.
Mangudya said there were competing demands for foreign exchange and apart from domestic needs, the regional market was now using Zimbabwe as a conduit for foreign currency.
He said cutting the huge imports bill and boosting exports would resolve the cash crisis. Zimbabwe incurs a $2,5 billion trade deficit yearly as the economy imports more than it exports.
Mangudya said because of the drought-induced imports, there was also pressure on the nostro accounts.
He said RBZ was advocating for the use of plastic money to ease the pressure for cash.