HARARE (Reuters) – Zimbabwe’s banks are limiting withdrawals as an excessive demand for cash has lead to shortages, the central bank chief said on Friday.
Zimbabwe ditched its currency in favour of the U.S. dollar after hyper-inflation scaled 500 billion percent in 2008, leaving it unable to print its own money.
A shortage of notes surfaced at the beginning of March, which the Reserve Bank of Zimbabwe (RBZ) initially said was caused by financial institutions underestimating demand and failing to improve distribution to branches.
On Friday, RBZ Governor John Mangudya told a parliament committee that the government had injected $145 million worth of cash into the financial system between Jan. 1 and April 6, while banks had imported $118 million.
“We don’t think the money is circulating … that money is not there in the banks,” Mangudya said. “There is excessive demand for cash. The appetite for holding cash in this country is very high.”
Banks have been limiting withdrawals to as low as $200, causing frustration among customers and discouraging deposits.
Most Zimbabweans earn a living in the informal sector and prefer cash transactions. Confidence in banks was also dented after hyper-inflation effectively wiped out savings.
In February Mangudya said companies and individuals in Zimbabwe had illegally exported $1.88 billion last year. He capped daily withdrawals at $10,000, saying amounts above that would require central bank approval.
Besides the U.S. dollar, Zimbabwe also allows use of South Africa’s rand, pound sterling, the euro and China’s yuan.
(Reporting by MacDonald Dzirutwe; Editing by Stella Mapenzauswa and Janet Lawrence)