(NEWZIMBABWE) RBZ suspends RTGS system as financial crisis deepens

RBZ suspends RTGS system as financial crisis deepens
By Business Reporter
Posted to the web: 03/10/2008 01:06:22

ZIMBABWE’S banking system lurched into a fresh crisis on Thursday after the Reserve Bank announced it was suspending the use of the Real Time Gross Settlement (RTGS) as a method of payment for most transactions with immediate effect. Reserve Bank Governor Gideon Gono said the RTG system was being abused by currency speculators.

The move came amid a deepening financial crisis in a week that began with efforts to put more cash into circulation. The move appeared to backfire into a new round of higher prices for basic goods. Government officials threatened to arrest any shop owners found to be gouging.

Zimbabwe's Prices and Incomes Commission said it has seen "rampant and unjustified price increases" since the start of the week, when the government introduced higher denomination currency and raised the daily limit on withdrawals from bank accounts.

The measures aimed to help ordinary Zimbabweans, who are struggling with the world's highest inflation rate. The country's official inflation rate is 11 million percent a year, but private financial institutions estimate it is far higher.

Gono said the RTGS would continue to be used by banks to send payments to the Reserve Bank, and for the central bank to send money to banks. Businesses and individuals would also continue using RTGS to pay taxes to Zimra and to make payments to government accounts held at the Reserve Bank.

"As the central bank, we have no option but to take this drastic measure in order to maintain sanity in the financial system,” the central bank chief said in a statement.

Gono said the system had become an active vehicle for illicit foreign exchange parallel market dealings, as well as a convenient excuse by sellers of goods to overprice their commodities.

He added: "The victims have largely remained the defenceless members of the public who are having to watch in despair as their hard earned incomes are grabbed away from them through the extractive pricing structure.”