Local Banks holding 2 % cash reserves
HARARE- Local banks hold 2% cash reserves in vaults as the bond notes flight persists amid revelations that the surrogate currency is now found in neighbouring countries, a central bank official has said.
Deputy Reserve Bank Governor, Kupukile Mlambo at a retailers Indaba in Harare highlighted how cash held by banks has continued to dwindle due to failure by the public to bank and growing externalisation of funds which amounted to $1 billion by 2016.
“Banks have between 2 to 3 % in notes and coins in their vaults. This means there is some money leaving the banks and not going back into the banking system,” Mlambo said.
The ideal cash deposit ratio is 15% which local banks have failed to sustain due to the prevailing liquidity crunch. In the absence of cash, banks have resorted to the RTGS system which accounts for a larger percentage of daily transactions while the point of sale system has also become a welcome relief amid a biting liquidity crisis.
While the drip fed bond notes system has often faced challenges in dealing with the growing liquidity challenges as it has since found its way into the informal sector which has no banking culture, the RBZ will have to be robust in its approach to plug externalisation.
Although the logic behind releasing bond notes sparingly was to control inflation, the RBZ could soon realise that the surrogate currency has been wiped out. “We have a situation where the bond notes are now scarce. We thought that since there was resistance, people would reject the bond notes,” Mlambo said.
Zimbabwe cash crisis has continued to escalate with daily withdrawals fluctuating everyday while notes continue to disappear from the sector. Bank queues are now monumental in almost all local banks as thousands of cash seekers wait patiently to withdraw the scarce bond notes.
The RBZ seems to be fighting a lost cause as the cash flight persists with Mlambo admitting that over a $1 billion disappeared from the economy last year. According to Mlambo, liberalised money transfers led to circa $800 million vanishing from the local banking sector in 2014 as foreign accounts went unregulated.
“There seems to be more cash outside than in the system. We have heard of bond notes being found in Mozambique, South Africa and Zambia which is unfortunate because we thought they were non externalisable,” admitted Mlambo.
He added that there was growing lack of confidence in the banking system as the hype rinflationary era continues to haunt Zimbabwe where the public would rather keep money than inject it into the banking system. Economists fear that the bond coins which are now being dispensed by banks could soon disappear as liquidity is being mopped out of the formal banking sector.
“The underlining reason is lack of confidence because between 2006 and 2009, we came up with policies that eroded confidence. Since dollarization was not well organised, people woke up win 2009 with nothing,” he said.
Mlambo urged retailers to bank their daily sales so as to improve cash circulation, reprimanding the sector from selling cash to money changers who have sprouted around the country holding money for speculative reasons.