HARARE — A biting liquidity crunch in Zimbabwe’s banking sector that has seen depositors queuing for days to withdraw their savings is threatening to put a damper on merry-making this festive season.
Economists fear the liquidity crunch could ultimately lead to the collapse of some banks.
Cash shortages and long, winding queues in banks, last seen during the 2008 meltdown when the local currency, the Zimbabwe dollar, was still in use, are now commonplace in most urban areas. In Harare’s Central Avenue, MetBank has been battling severe cash shortages for the past month, which bank officials blame on depositors no longer making regular deposits.
“We are not sure how long the situation will continue for; it is really a wait-and-see approach,” said a banking official in Harare who asked not to be named.
MetBank’s Bulawayo branch has imposed withdrawal limits of $200 in an attempt to make the little cash available go around.
Public servants last week were paid their annual November bonuses by the government and the bulk of the nearly 230,000 public servants are likely to access their windfall at the beginning of next month — a situation that certainly will increase the demand for cash ahead of the Christmas holidays.
“The liquidity crunch also has to do with pre-and post-election pressure that has been bearing on the banking sector,” the banking official said. “In the run-up to elections, investors were not sure of the outcome of the elections and anticipated violence and disputes, while in the post-election phase, some people in the business community did not get the results that they wanted and either externalised funds or held on to their savings.”
The economy has emerged as President Robert Mugabe’s single biggest enemy. Western financial institutions have refused to open up new lines of credit until Zimbabwe clears off a $12bn debt owed to the International Monetary Fund.
Prof Tony Hawkins, a University of Zimbabwe Graduate School of Business lecturer, said for the economy to grow at 7.3% annually, in line with targets set by the Zim Asset blueprint, an investment of 33% of gross domestic product would be required annually.
“Going forward, growth will be limited by a number of binding constraints that will make it extremely difficult to reach the Zim Asset target. If growth depends heavily on investment, and investment depends significantly on savings, then consumption growth must slow substantially,” Prof Hawkins said.
The appointment of Indigenisation and Economic Empowerment Minister Francis Nhema in September has slowed concerns over the hasty implementation of the 51% indigenisation programme.
Mr Nhema’s predecessor, Saviour Kasukuwere, ruffled feathers during his tenure when he indicated his intention to force foreign-owned banks to comply with indigenisation rules.
Mr Nhema said targeting the banking sector was not his priority. “Why should I target foreign banks? It is depositors’ money that is in there, and not ours. We have no business in indigenising the banks.”
Economist Brains Muchemwa said the government was incapable of intervening directly in the liquidity crunch and needed to emphasise reforms that would create an environment that would enable the private sector to obtain credit.
“Areas in need of attention include capitalising the Reserve Bank of Zimbabwe, as well as restoring its lender-of-last-resort functionality. Measures aimed at deepening the financial sector will need to be pursued in order to build confidence and eliminate inherent vulnerabilities within the banking sector,” said Mr Muchemwa.
“All these measures, if implemented, will create a stronger Reserve Bank of Zimbabwe.”