Expect More Cash From Banks As RBZ Instructs Banks To Pass Cash To Customers

The central bank, Reserve Bank of Zimbabwe (RBZ) has told people to expect more physical cash (cash), to withdraw, as it will be injecting more foreign currency into the financial sector in the foreseeable future. The move will obviously relieve the acute cash shortages Zimbabwe is experiencing.

Zimbabwe has been languishing from cash shortages for a couple of years, prompting the emergence of black markets that do in cash burning. But since two weeks ago, people have been withdrawing money without too many hassles. Depositors have lately been withdrawing both bond notes and US dollars.

According to the RBZ governor, Dr. John Mangudya, the sudden availability of cash at banks was due to the increase in exports.  Speaking to Daily News, Dr. John Mangudya said;

Simba rehove riri mumvura (the strength of fish is found in water), and so our strength lies in exporting. If we improve our exports, we will increase our imports of cash so that we are able to meet the banks’ requirements…….What you saw at the weekend is part of our efforts to meet the requirements of banks, which we have instructed banks to pass that cash on to their clients….we expect the RBZ to continue importing more cash to meet the requirements of banks and their clients…….We need to be an export-oriented economy. As we export more, we will import more cash

Its conventional wisdom that exports generate foreign currency. Accordingly, tobacco and mineral sales of $780 million (compared to $180 million generated last year the same period) has incited a surge of foreign currency cash in Zimbabwe. Besides exports, remittances by the diaspora have been key to mitigating cash shortages.

However, the sudden availability of cash was interpreted by some as a way to paint a good picture to the ruling party (Zanu-PF) just before the election voting day.

Anyway, Zimbabwe has been and still is highly dependent on commodity exports for foreign exchange earnings. However, the absence of value addition in commodity exports, among others, has forced the nation to lose a large amount of foreign currency.

The dangers of growth being export dependent is still something to worry about. The volatility of commodity prices provides an obvious risk. Even with manufactured products (value-added products) whose prices are more predictable, a downturn in global demand or imposition of sanctions leaves Zimbabwe exposed to a halt in the generation of foreign currency.