Maravi

Zim financial institutions shun cash from central bank

Zim financial institutions shun cash from central bank
By Kingsley Kaswende in Harare
Thursday January 24, 2008 [03:00]

The Reserve Bank of Zimbabwe (RBZ) is stuck with trillions of Zimbabwean dollars as the country’s seventeen financial institutions have been shunning the cash from the central bank, creating a fictitious shortage of cash. RBZ governor Dr Gideon Gono on Tuesday had to take journalists to the central bank’s vaults where the scribes saw at least Z$100 trillion that remained uncollected by banks in a move to justify that the prolonged cash shortage was not the responsibility of RBZ.

He branded the banks as “indisciplined and unethical”, accusing them of deliberately holding on to depositors’ money for use in illegal speculative activities. He said because banks had invested customers’ money into other non-core areas, they had therefore failed to avail cash to pay for cash on collection from the central bank.

“The result by banks to collect cash is a result of them tying depositors’ funds in illiquid speculative investments in the stock exchange, real estate, foreign exchange and other forms of non-core investments,” Dr Gono said.

Zimbabwe has been faced with a two-month long cash shortage, causing residents to spend nights on bank corridors in a bid to withdraw some of their deposits.

To Dr Gono’s amazement, the queues at banks continued even after printing new notes in bills of Z$250,000, Z$500,000, Z$750,000, Z$1 million, Z$5 million and Z$10 million in just three weeks.

Dr Gono said as of Tuesday this week, RBZ had excess cash stocks amounting to Z$100 trillion, in addition to Z$98 trillion released in new bank notes, yet hundreds of depositors continued queuing at banks.

Dr Gono said he would not let that kind of unethical behaviour go on in the banking industry.

“Can we let this indiscipline go on while we look? Certainly not,” Dr Gono remarked.

Total currency in circulation, DR Gono said, stood at Z$170 trillion, an amount he said was too high for an economy like that of Zimbabwe even with the prevailing hyper inflationary conditions.

Dr Gono ordered that there should be no queues at banks with immediate effect because there was enough cash to meet demand.

He urged people who would face difficulties in collecting their money to report their banks to police and the central bank for appropriate punitive measures to be taken.

But some banks fear that that their customers would withdraw all their money and therefore lose business.

Labels: BANKING, FINANCIAL CRISIS, GIDEON GONO, ZIMBABWE

posted by MrK @ 7:22 AM