Shortage of cash as Zim dollars flood neighbouring countries

By Lance Guma
12 December 2006

A serious currency flight into neighbouring countries is thought to be at the centre of a shortage of lower cash denominations in Zimbabwe . Several banks are reportedly struggling to supply 1000 and 500 dollar notes while the same cash is reportedly in plenty of supply across the different borders. Simon Muchemwa in Harare reports that only Z$10 000 denominations are readily available and the inconvenience is being felt by shoppers. Many people are having to move from one cash machine to another in the hope of finding denominations that allow them to take money below Z$10 000. At the time of going on air the problem was mainly evident in Harare with no clear signs of how widespread it was on a national scale.

In countries like Mozambique , Malawi , Zambia , Botswana and South Africa the Zimbabwe dollar has become a major source of business on the black market. Economists say the flight of the dollar into these countries reflects the dwindling number of transactions taking place in Zimbabwe . Muchemwa also reports that with most commodities in short supply people are having to source goods outside the country. Some traders are doing brisk business selling Zimdollars back to Zimbabwean shoppers returning home. The same traders also sell foreign currency to those travelling outside the country. In simple terms, the currency itself has become the source of intense trading and not much is left for use in other transactions.

Zimbabweans also tend to keep their money at home rather than put it in banks because of rapid inflation and a general lack of faith in the entire economy. Any cash shortage faced by the banks is expected to discourage them further. The government is accused of putting political considerations over economic matters and critics point to the dysfunctional nature of the economy as the end result. Commodities scarcely available on the official market are available on the black market and attempts at controlling prices have failed to arrest inflation. The International Monetary Fund (IMF) was recently in Zimbabwe on a fact-finding mission to ascertain if the country has made any improvements in undertaking major economic reforms. Given facts on the ground, critics say the trip was a waste of time.