'Cash crunch is a temporary affair'

Cash shortages in parts of Zimbabwe are temporary as strategies being implemented by authorities will ease the situation soon, Finance and Economic Development Minister Patrick Chinamasa has said.

Over recent weeks, liquidity challenges have hit several urban centres, with banks failing to meet daily cash demand.

Yesterday, a number of financial institutions in Harare were limiting cash withdrawals to not more than US$200. Minister Chinamasa said: "We actually import some of our money through our banks, and at that rate, you can understand it will be difficult to have cash in the bank.

"But it's a problem that we are now tackling, it's a temporary one. First, we don't print US dollars. We are a unique country, probably one of the countries in the world which use the US dollar, which is foreign currency, but we use it as a domestic currency.

"So, some of the challenges that we are facing are just arising from the fact that a foreign currency is being used to buy indigenous fruits, wild mushroom, tomatoes and then, most importantly, to pay wages.

"When I tell colleagues outside the country that we pay wages in US dollars, they think I'm not telling the truth. There is no other country in the world that pays wages in US dollars as a foreign currency."

Minister Chinamasa said Government would ensure large sums were moved through the banking system under a system similar to the one being used for tobacco farmers.

From this marketing season, tobacco farmers are not being paid cash at auction floors and all payments for sales are being made into their bank accounts.

Minister Chinamasa implored the public to embrace formal banking so that money circulates properly.

"Overall, I'm told that the financial inclusion with respect to tobacco farmers is going reasonably well, and any problem arising will be (resolved). Today, it's the tobacco farmers, tomorrow it's the Grain Marketing Board. We will also pay (for maize deliviries) through the banks. Next will be cotton farmers.

"We are targeting those who are making money. We have some understanding and some idea of what's going; what's going on is that although we don't print the US dollar, we are a cash economy.

"Everybody who is paid in the US dollar withdraws all their money when they are paid and put it under a pillow. Those people who are withdrawing the money still expect the banks to have money. You can't move your money from the banking system and still expect banks to have cash when you don't print the money."

Meanwhile, the African Development Bank has approved a US$25 million facility for Cabs to support SMEs and agriculture.
In a statement, the AfDB said: "The board of directors of the African Development Bank approved a US$25 million Trade Finance Line of Credit facility to Central Africa Building Society in Zimbabwe on April 20, 2016. This medium-term facility will help to support the expansion of CABS' operations as a provider of trade finance to local firms as well as small and medium-sized enterprises.

"The resultant credit support will provide for the importation of critical inputs such as agro chemicals, pesticides, farm machinery, spares and equipment, which Zimbabwe urgently needs to revive its agricultural and manufacturing sectors. The credit support will also foster financial sector strengthening and revenue generation.

"Including roll-overs, it is projected that the facility will finance approximately US"150 million of trade over a three-and-half-year period."