ALL efforts by the Reserve Bank of Zimbabwe to solve the current cash problems in the country seem to be hitting a snag.
The Reserve Bank on Wednesday increased the daily maximum cash withdrawal limit for the tenth time this year.
In August alone the bank reviewed withdrawal limit three times, a development which left the market and economists wondering if the bank was in control of the fiscal and monetary issues. They also wondered why the central bank was repeating the same exercise but expecting different results.
On August 1, Gono increased individual withdrawal limits from $100 billion (old currency) to $200 (new currency).
On August 7, he increased the withdrawal limit from $200 to $300. A statement attributed to him said the withdrawal limits had been increased as a tribute to
Zimbabwe’s fallen heroes. The commemoration of the country’s Heroes’ Day was on the Monday. He was back in action again on August 22, increasing the withdrawals from $300 from $500.
The Reserve Bank on Wednesday announced that daily cash withdrawal limits had been raised from $50 000 to $500 000 for individuals, while companies will now access $1 million, up from $10 000.
The Reserve Bank has imposed withdrawal limits to promote the use of plastic money in an effort to contain money supply and parallel market rates which rise when there is so much cash on the market.
The use of plastic money has not taken off at the anticipated levels as the country’s telecommunications network, which is meant to support the movement of transactions, is unreliable. Use of cheques is shunned by retailers and manufacturers because of high inflation.
Long queues have been experienced at banks since October last year. Some banks are making inadequate cash requests from the Reserve Bank as they do not have treasury bills which are needed by the Reserve Bank as collateral.
Economists say the main reason for the shortage of cash on the market was high inflation running at well over an official 231 million %.
In a statement the Reserve Bank said the upward review of withdrawal limits followed the introduction of $100 000, $500 000 and $1 million notes.
The new notes are the 22nd, 23rd and 24th introduced by the Reserve Bank this year alone.
“The Reserve Bank of Zimbabwe is pleased to announce the introduction of $100 000, $500 000 and $1 000 000 bank notes, which will come into circulation with effect from November 5, 2008,” read the statement.
Ironically parallel market dealers had the new $500 000 note on Monday, November 3, when it was scheduled to be released two days later. Some commercial banks had the note by Wednesday midday.
The Reserve Bank last reviewed withdrawal limits on October 10 from $20 000 to $50 000 when the $50 000 note came into circulation.
Withdrawal limits for companies had stayed at $10 000 per day as a way of encouraging companies to use alternative non-cash means of payment such as cheques and various forms of plastic money.
But the unreasonable limit, coupled with the Reserve Bank’s decision to suspend the Real Time Gross Settlement system (RTGS), has instead seen many businesses close their doors, unable to pay their bills or their staff.
But the move, supposedly to make life easier for the average Zimbabwean, has prompted mass outcry amid the collapse of the economy.
Although cash withdrawal limits are being reviewed upwards more regularly than previously, sharp price hikes that follow each review have frequently rendered any new limit inadequate only a week after its introduction.
The digital money supply now appears to be way beyond the control of the Reserve Bank or anyone else; the creation of new money to pay essential state bills must be significantly less than the expansion of money supply coming from the equity markets and the arbitraging between exchange rates that seems to dominate the “dealer” economy.
The Zimbabwe Congress of Trade Unions (ZCTU) has been describing the Reserve Bank’s maximum daily withdrawal limits as a joke.
Gono has increasingly come under fire for imposing a limit on cash withdrawals, a situation that has resulted in many people making repeated trips to the bank to withdraw cash that in many cases is hardly enough to cover the cost of travelling to the bank.
The ZCTU, the country’s largest labour federation last months wrote to the Reserve Bank governor Gideon Gono asking him to do away with the pegging of the maximum amount one is allowed to withdraw from their bank account.
Independent economist John Robertson said monetary reforms being pursued by the Reserve Bank would remain futile in the absence of substantive strategies to shore up the country’s battered economy.
“There should be increased production in all major sectors of the economy. He (Gono) is addressing symptoms as opposed to the root causes,” he said.
By Paul Nyakazeya