Zimbabwe is suffering from a shortage of cash in the form of US dollars, the main accepted currency in the country since it abandoned its own in 2009 following sustained hyperinflation.
A press release issued yesterday by the Governor of the Reserve Bank of Zimbabwe, DR. J.P. Mangudya, has highlighted the Zimbabwe cash shortage, and has delivered a plan on how to resolve the problem.
Zimbabwe’s currency collapse
Zimbabwe has relied on foreign currency since it abandoned its own in 2009 following sustained hyperinflation. The US dollar was introduced at this time but other currencies have since become additionally acceptable for payment transactions including:
- South African Rand
- British Pound
- Australian Dollar
- Indian Rupee
- Japanese Yen
The US dollar is the people’s preference
Citizens reportedly prefer the use of the US dollar citing that they are fearful that other currencies will not maintain their value against the US dollar. This has led to high usage of the currency within the country, resulting in a shortage of US dollar notes within Zimbabwe.
According to the Central Bank’s press statement, queues at banks and ATMs are a regular problem. This is due in part to the “dependency of USD cash for almost all domestic translations”, chosen above other available currencies in Zimbabwe. Utilisation of US dollar banknotes within Zimbabwe has increased from 49% in 2009 to 95% in 2016.
Plans to ease the Zimbabwe cash shortage
The Reserve Bank of Zimbabwe has produced a number of ways to help ease the cash shortage including the following key points:
- To restore and promote the multi-currency system and reduce the pressure on the US dollar cash reserves, 40% of all new US dollar foreign exchange receipts from the export of goods and services will be converted by the Reserve Bank to South African Rands and 10% to euros. This will begin to take place from 5 May 2016.
- The Reserve Bank has established a US$200 million foreign exchange and export incentive facility supported by the African Export-Import Bank (Afreximbank) to ease the high demand for foreign exchange. To reduce the risk of possible abuse of this facility (through capital flight) the Reserve Bank will introduce bond notes in denominations of $2, $5, $10 and $20 with the equivalent value in USD.
- The Reserve Bank has determined a foreign exchange propriety list to provide guidance to banks distributing foreign currency.
- Cash and ATM withdrawals have been limited to US$1,000, €1,000 or 20,000 rand. The same amounts are also set as the maximum limit for taking cash outside of Zimbabwe.
To read the Reserve Bank of Zimbabwe’s press statement in full click the following link: