Government will allow individuals and companies hoarding cash inside Zimbabwe to bank the funds without prosecution in line with steps to end currency shortages. Further, the Reserve Bank of Zimbabwe will increase cash imports.
In an interview with The Sunday Mail last week, RBZ governor Dr John Mangudya said these and related measures on externalised cash will improve liquidity.
“The measures being put in place to actualise this commitment include confidence-building policies enunciated by the President at the inauguration ceremony. The policies include opening up of the economy to enhance business footprint in the country, dealing with fiscal consolidation, enhancing exports and diaspora remittances, accelerating the re-engagement process and building a disciplined society.
“Confidence-building is critical as it gives impetus to the efficient circulation of money within the economy, and is, therefore, a prerequisite to improve the availability of cash at banks.
Secondly, the amnesty granted by the President in respect of illegally-expatriated cash and assets is expected to increase cash availability once the funds start to flow into the economy.
“Thirdly, Government, through the Reserve Bank, is working on a similar amnesty to deal with cases of in-country hoarding of cash at homes. Hoarding of cash is counter-productive as it reduces the circulation of money. Hoarding has a cash-hemorrhaging effect on the economy.
Fourthly, the Reserve Bank shall be increasing the importation of cash using part of the Nostro Stabilisation Facility proceeds.
Cash imports currently stand at around US$50 million per month to cater for diaspora remittances, small-scale gold producers and the banking public, and $15 million bond notes to fund the Export Incentive Scheme.
“If this money was circulating efficiently within the Zimbabwean economy, cash currently being imported would go a long way to meet the requirements of the banking public.
“Fifthly, all the above together with the continuous promotion of the use of plastic and mobile money should be able to reduce the burden being endured by the banking public in the short to medium-term.”
Economist Dr Gift Mugano commended Government’s efforts and added more could be done.
“These are very noble measures. We have a Banking Act which requires individuals and companies to make deposits everyday.
However, as a country, we were no longer abiding by these laws which resulted in the cash shortages,” he said.
“According to a World Bank Report published in 2012, US$7,2 billion was circulating in the informal market, meaning there is more money circulating in the informal sector. Thus Government should put in place measures that will make the informal sector deposit money in banks.”
He added: “These measures should restore public confidence in the banking sector. In terms of the amnesty, it is an excellent move and if the money comes back, there will be no need for us to borrow anymore.
“This exercise should be extended to everyone regardless of status. In addition, involving the international community is a panacea which will take the country in the right direction.”
Zimbabwe has been grappling with cash shortages since April 2016, with externalisation and hoarding figuring among major causes. RBZ statistics show that roughly US$3 billion was externalised to Mauritius, the Far East, Botswana and other destinations between 2015 and 2017.
US$1,8 billion of this was spirited away illegally and the balance expatriated via management, service and technical fees, and royalties.
Last week, President Emmerson Mnangagwa granted a three-month moratorium for individuals and companies that externalised cash and assets to bring them back.
The amnesty runs from December 1, 2017. In his inauguration speech on November 24, President Mnangagwa assured the nation that his Government would get to the bottom of the cash shortages. The President said,
“In the immediate, the liquidity challenges which have bedevilled the economy must be tackled head-on and must be dealt with as a matter of urgency. People must be able to access their earnings as and when they need them.
“My Government will ensure financial sector stability and viability and will put measures in place that promote deposits and savings through bank deposits and other appropriate financial instruments which bring fair rewards to depositors.
The current banking culture where costs are levied on depositors must come to an end.”