Zimbabwe’s financial institutions have reportedly been hit by severe liquidity constraints forcing some of the banks to limit withdrawals as government pays out annual bonuses for the civil service against the backdrop of an underperforming economy.
Report by Bernard Mpofu/Moses Matenga
NewsDay yesterday gathered that most commercial banks have put daily limits on withdrawals triggered by uncertainty. This follows the loss of $1 billion from the formal banking sector just before and after the July 31 elections.
Information at hand shows that the daily limits now range from $200 to $1 000, with predominantly foreign-owned banks having a higher threshold compared to indigenous banks. As a result the depositors will have to incur more bank charges.
A senior official working for a locally-owned commercial bank told this newspaper that depositors started queuing at the bank’s automated teller machines (ATMs)as early as 5am yesterday in a bid to withdraw their bonuses, but failed to do so up till mid-morning. He, however, said the reason was to do with technical hitches at the cash dispensers.
“Most of them came as early as 5am as you know it’s month end and civil servants are still getting their bonuses. Most of them could not withdraw their money because of some technical challenges. The machines were down, but the problem has since been addressed and they are now getting their money,” he said. “We are not putting caps on their withdrawals because the money is there. We don’t want you to write a negative story on this one because it will have a boomerang effect.”
Police officers made up the bulk of account holders that formed long queues at Metropolitan Bank (Metbank), CABS, Kingdom and Trust banks, among others, trying to withdraw their salaries and bonuses yesterday.
Soldiers were the first to receive their bonuses two weeks ago.
When the news crew visited one government-owned financial institution at mid-day yesterday, two queues of withdrawals were seen meandering for several metres outside the bank with security details struggling to maintain order and calm.
Bankers’ Association of Zimbabwe (BAZ) chief executive officer Sij Biyam, however, said the association was not aware of the new withdrawal caps placed by the banks.
“As far as I know, the liquidity challenges that started in 2009 are still persisting the same way they were then. The best way to look at this issue would be to approach the individual banks because as far as I know, the association hasn’t received such reports. Some banks may have their internal issues, so it would be best to approach them,” Biyam said.
Panic withdrawals during the election period, according to banking sector sources, had resulted in some banks making frantic efforts to negotiate fresh lines of credit.
A source at one of the commercial banks with foreign ownership said the bank was in talks with foreign investors to secure $80 million to plug a hole created after the bank lost $30 million in the run-up to the elections.
This, the sources said, could ease the cash constraints affecting the bank despite concerns that confidence in the fragile banking sector was at its lowest.
The developments come at a time when the Reserve Bank of Zimbabwe has delayed the announcement of the monetary policy statement which was initially scheduled for August.
Reports suggest that central bank governor Gideon Gono may be on his way out after serving two terms since 2003. The banking sector is reportedly pinning its hopes on the new Reserve Bank chief to steer the sector.
Players say systemic risks confronting the financial services sector stemmed from the undercapitalisation of the central bank which rendered the bank unable to play its role as lender of last resort.
The banking sector, according to a pre-budget submission made by BAZ, was now characterised by serious liquidity constraints and generalised banking sector vulnerabilities which included, among other issues, slowdown in broad money supply growth since the beginning of 2012, with lowest growth rates being recorded in 2013. Official figures showed that broad money grew by 12,23% in May, declining from 14,85% growth in April.
“The composition of deposits has generally remained unchanged over the past 12 months — indeed since multicurrency. Deposits still remain highly short-term with demand deposits constituting an average of 83% of total deposits,” BAZ said.
“The economy is currently haemorrhaging via the current account, as the balance of payments situation continues to deteriorate, reflecting low and declining domestic industry capacity utilisation levels.”
The bankers proposed a raft of measures which include re-engagement with multilateral finance institutions and the need to formulate an effective debt arrears clearance programme.
Faced with the new challenges, the new administration has crafted a new economic blueprint, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset), which is anchored on attracting more foreign capital as well as growing domestic savings. This, according to ZimAsset, is key to restoring confidence in the financial services sector.
Zimbabwe’s economy has fallen to its lowest ebb since dollarisation with key economic sectors, save for tobacco farming, in a free-fall.
The manufacturing sector, which contributed 20% of the economy at its peak, is confronted by de-industrialisation.
Experts say government has not helped matters by delaying the 2014 budget statement which gives signal to investors on the new path the new administration wants to chart.