ZIMBABWE’S central bank is to enforce the use of the South African rand and the Euro in order to ease severe cash shortages of United States (US) dollars in that country.
A raft of monetary policy measures announced Wednesday will also see the introduction of a US dollar-backed local note in the future.
However, the country’s central bank governor denies that he is trying to introduce the decommissioned Zimbabwe dollar through the backdoor.
Queues outside several banks have been growing as the US dollar remains in short supply.
At this bank the ATM’s have run out of the cash and over the counter withdrawal limits have been slashed.
A resident says, “We no longer trust the banks, because if you want to withdraw $500 and you are offered $200.”
Another resident says, “I was here yesterday from 10 to half three, now i am back to get another balance, i need about 800 [dollars] so that means i need to be here for almost four days.”
In 2009 Zimbabwe scrapped a local currency eroded by runaway inflation.
Banks are struggling to import the US dollar, while consumers are reluctant to switch to plastic money.
The production of local goods has slumped leading to a high demand for foreign exchange to import consumer items.
The central bank also believes that some businesses are laundering the strengthening US dollar out of the country.
On Wednesday it announced new restrictions reducing daily cash withdrawals to a $1000.
Zimbabwe Reserve Bank Governor John Mangudya says, “The maximum cash allowed to be taken outside the country has been revised downward from 5000 dollars to 1000 us.”
The weakening rand is being shunned, but the Central Bank intends to enforce its use. 40 % of export receipts will be paid in rand. In 2013 50% of the transactions in Zimbabwe were done in Rand but not anymore.
Mangudya says, “95% of transaction ins Zimbabwe is conducted using the us dollar and 5% rands. It is essential to go back to basics and restore the multicurrency system.”
A 200 million dollar incentive facility for foreign exchange earners will be paid out in bonded local notes.
The Reserve Bank denies it’s trying to re-introduce the discredited Zimbabwe dollar.
Mangudya says, “The fundamentals are not in place.”
Meanwhile, the central bank has urged businesses to introduce Point of Sale machines to reduce the demand for cash.