THE Reserve Bank of Zimbabwe has instructed local banks to stop offering overdrafts to customers seeking to settle their foreign obligations, as it battles to control a worsening foreign currency crisis.
Central bank governor, John Mangudya, said banks have been stopped from offering overdraft facilities for cross-border transactions.
Mangudya said: “We do not want foreign purchases backed by overdrafts. We stopped banks from doing it. What we want is to have these foreign payments funded by money in your account.”
He said banks that wanted to support their customers “should arrange lines of credit for their customers”.
“We need discipline,” he said, while addressing a public dialogue on the cash crisis in the capital last week.
Economist, Ashok Chakravarti, said: “These are signs of deep seated problems, which need to be addressed. We need some immediate solutions. In a short period, we have seen the effects of dollarisation and we don’t see it getting better. We use the United States dollar as an instrument of stability, but we have to have good relations with the US to sustain supply. In the end, we have to go the route of de-dollarisation, that is, having our national currency.
“But we have a history because our Zimbabwean dollar lost credibility. This means that before the introduction of the national currency, there should be stringent pre-conditions. The only other option is the use of the rand as a currency of circulation, leaving the multicurrency system. But I am not recommending the rand as a complete replacement of US dollars.
“Unlike the US dollar, we have adequate supply of (the) rand. We also have good relations with South Africa to sustain supply.”
The foreign currency shortages in the country have left many companies unable to pay foreign suppliers. Some suppliers have stopped credit facilities to Zimbabwean businesses following the emergence of payment problems.
Late last year, the central bank introduced a foreign currency allocation priority list, whereby companies that import raw materials and industrial machinery for exports are supposed to get preference ahead of importers of luxuries.
Those companies that are not exporters but import raw materials and machinery for local production or value addition are also supposed to be on top of the priority list.
Zimbabwe ditched its own currency in 2009 and adopted a multi-currency regime to escape hyperinflation.
The cash situation had improved significantly until last year when foreign exchange begun dwindling prompting the central bank to introduce bond notes late last year.
However, bond notes appear to be disappearing from the banking sector as well.
The severe cash crisis in the economy has resulted in banks limiting the amount of cash depositors can withdraw on a daily basis. Most banks have also suspended dispensing money through the automated teller machines. In some cases, depositors spend days in bank queues but still fail to access cash.
Government said part of the reasons for the cash shortages were companies that were not banking cash and a number of them have now been brought to court and have been fined for their actions.
As part of measures to mitigate the cash crisis, government has called on depositors to make use of plastic money.
Reacting to the call for the country to adopt the rand, Mangudya said: “The rand can be externalised as well. Even in Dubai, there were rand accounts that were being used for money laundering. But we have stopped that and closed these accounts. What is true with the rand, is also true for the US dollar.”