HomeBusinessBank chiefs take Tsumba to task

Bank chiefs take Tsumba to task

Ngoni Chanakira

THE Governor of the Reserve Bank of Zimbabwe (RBZ) Leonard Tsumba says Fidelity Printers and Refiners (Pvt) Ltd is now working “overtime” to increase the supply of banknotes in Zimbabwe to tr

y and solve the nation’s cash shortage.


He says Fidelity, a subsidiary of the central bank, has also begun printing the new $1 000 notes after receiving “the green light” from President Robert Mugabe.


In an exclusive interview with businessdigest on the latest currency problems, Tsumba said: “The problem of the availability of local currency can be reduced by the introduction of the higher denomination of currency and by increasing the supply of $500 notes into the economy. His Excellency the President has already approved the introduction of the $1 000 note and Fidelity Printers and Refiners is currently working overtime to increase the supply of the banknotes. The ultimate solution is to reduce inflation to sustainable levels.”


Zimbabwe’s inflation currently stands at 269,2%, the highest since Independence and within the Sadc region.


While Tsumba would not disclose how Zimbabwe could reduce inflation, bankers said government needed to immediately curb its “insatiable appetite for funds from the central bank”. They said the RBZ was failing to “curb excessive government spending” and, as such, the governor was “fighting a losing battle”.


The RBZ has been advancing government an average of $28,8 billion weekly from its coffers since February 21 this year, resulting in the domestic debt soaring to $354,1 billion by March 21.


Asked how the RBZ could help solve the issue of too much currency being carried around and not being sent through the financial system, Tsumba said in an environment of hyperinflation the tendency was for the economy to transact on a cash basis.


He said: “The transacting public will, therefore, hoard currency at home as opposed to depositing it in the banking system. Rates of return on money deposits with banks are too low, relative to inflation.


“Higher deposit rates would increase incentives for the public to hold their money balances through the banks as opposed to stashing their cash in mattresses. The underlying solution is to bring economic certainty by reducing inflation through the stabilisation of inflationary expectations.”


Bank bosses contacted on the currency crisis said the RBZ was “being too casual” about the present financial crisis which has resulted in some of them turning to the “black market” to secure cash.


They said the cash problems were because some of the RBZ’s policies are “unclear and unpredictable”.


NMB Holdings Ltd (NMB) deputy managing director James Mushore said: “The availability of local currency can only be solved if issues of the foreign exchange parallel market are addressed. The current high rate of inflation coupled with the acute shortage of foreign exchange have forced most people to hold on to their cash resources outside the financial system.


“With the central bank facing its own problems and thereby not availing the banks with the required bank notes, the shortage of local currency continues to worsen. The development of the black market for foreign exchange and other basic commodities has exacerbated the problem.”


Mushore said the RBZ simply needed to supply more bank notes to the banks.

“In an economy with rampant and ever-increasing prices, other forms of payments are less frequently used,” he said.


Trust Holdings Ltd (Trust) chief executive officer William Nyemba said: “We have to swallow our pride and re-engage the international community to help with addressing the supply of foreign currency. We badly need to bring back the much needed confidence in our economy and of course our own people so that we do not have a dangerous cash economy.”


In their response on the issue, Kingdom Financial Holdings Ltd (KFHL) said: “Inflation is to blame for the shortage of local currency because its erosion of the real value of money has made it difficult to use the same stock of cash to buy goods and services due to the increase in their prices. This means that more notes need to be printed and coins minted to accommodate the rise in the demand for cash emanating from the fall in the value of money due to inflation.”


The KFHL chief executive officer is Lysias Sibanda.

Kingdom said a lasting solution to the shortage of cash was to address the problem of inflation, which was constantly eroding the purchasing power of money.


“We need $10 000 notes now,” Mushore said. “We should stop minting one cent coins up to one dollar coins. If we need to keep the mint busy, we should now have coins for the $10, $20, $50 and $100 denominations.”

Recent Posts

Stories you will enjoy

Recommended reading