CASH withdrawal limits are normally the discretion of banks and never an area for which central banks are forced to influence.
Normally, banks have no-notice maximum withdrawal limits, but when a depositor wants to withdraw large sums of cash, they have to inform their bankers in advance so that their branch makes provision for the huge amounts for the cash requirements.
In Zimbabwe, this is the regime many people experienced before the economic crisis deepened in 2000 following a disruptive, oft-violent land expropriation exercise that triggered massive currency devaluation and hyperinflation.
Long bank queues became the order of the day, and depositors had difficulty withdrawing cash.
The situation normalised in 2009 after the country ditched its currency for multiple currencies.
Although most of the deposits remained transitory due to lack of confidence in the banking sector, there had been a noticeable improvement in confidence through the years until last year when cash shortages crept back into the market.
The Reserve Bank of Zimbabwe (RBZ) blamed cash merchants whom it said were externalising United States (US) dollars from the system.
It began a crusade to compel depositors to use debit cards for transactions as the cash shortages worsened.
The central bank also imposed deposit withdrawal ceilings, which have been gradually lowered to between $20 and $100 per day.
Retailers who paid cash to customers under a cash-back facility were also asked to dispense not more that $20 per customer per day.
These withdrawals are mainly occurring in the form of bond notes, a domestic currency introduced in November to improve liquidity and stem the export of greenbacks.
Depositors, who are sleeping in bank queues to get cash which is being rationed by banks, have been described as irresponsible and obsessed with carrying notes. Most of these are old men and women who travel from rural outposts to get their pension payouts in the cities and towns.
But the cat is now out of the bag.
According to a report by the International Monetary Fund (IMF), the RBZ has explicitly encouraged withdrawal limits to cover its own misdemeanours that could precipitate bank insolvencies.
The IMF has noted that due to heightened sovereign risk and insufficient RBZ reserves to honour its obligations with banks, bank assets in the form of electronic balances and Treasury bills, which government has been dishing out like confetti, pose liquidity and solvency risks.
Government and RBZ officials have clearly told IMF staff not to worry: Withdrawal limits will ensure there is no run on banks and will therefore maintain bank liquidity, which would be boosted by the RBZ credit to government.
The large Treasury Bill holdings with banks, the RBZ avers, will in fact raise bank profitability.
We know too well from past experience that experiments of this nature have always had ruinous effects on the population.
Depositors are suffering because of uncontrolled government profligacy, and it is not something our authorities should be proud of.
They have replaced US dollar deposits with a phantom currency created through their electronic platforms due to fiscal indiscipline.
It’s time for the RBZ and government to change and put people’s interests first.