IN recent weeks some financial institutions have announced
they are further reducing limits for foreign card payments such as MasterCard,
Visa Card and debit card settlements with some suspending the use of such
payments altogether, indicating the worsening liquidity crunch and foreign
currency shortages.
This comes as recent statistics from the central bank show
that Zimbabweans are holding on to their United States dollars as the
unpredictable economic environment deteriorates.
Statistics from the Reserve Bank of Zimbabwe (RBZ)’s
monthly economic report show that in April the country circulated about
US$334,61 million before the figure declined to US$290,67 million in May. It
further declined to US$138,98 million in June and US$101,82 million in July.
Zimbabwe is experiencing an economic crisis which has
lasted for almost two decades. The crisis is showing no signs of abating.
The crisis is characterised by the debilitating liquidity
crunch, company closures, retrenchments as well as a cash crisis which has
resulted in long winding bank queues.
In a bid to survive in this kind of environment, financial
institutions have had to adopt different measures and strategies. In
particular, banks have been struggling with their mandate of providing cash to
their customers as many walk away empty handed.
Most banks are no longer giving out cash in US dollars, but
give out either bond notes or coins. Some banks have reduced maximum daily
withdrawals to as little as $10 in coins.
Limitations on foreign card payments and in some instances
suspension is evidence of worsening foreign currency shortages.
Last week one of the few banks which were still offering
huge amounts when transacting using their foreign cards, Stanbic announced new
limits for the transactions.
“Dear valued customer, please be advised that our foreign
card payment limits have been revised from US$1 500 weekly to US$1 500 per
month with immediate effect,” the bank wrote on its website.
In the same week Econet Wireless also announced that its
subsidiary EcoCash which is the country’s largest mobile payment platform, has
suspended the use of its MasterCards outside the country due to worsening
foreign currency shortages.
The company joined several other local banks that have
stopped usage of either Visa or MasterCards outside the country due to the
persisting foreign currency shortages that have hamstrung foreign payments.
“Due to the foreign currency challenges, we regret to
advise that with immediate effect EcoCash will be suspending international
transactions on the debit card.
“However, with effect from November 1, 2017, we are happy
to advise that you will be able to transact with the debit card outside
Zimbabwe upon pre-funding at your nearest Econet shop,” the company said in a
statement.
EcoCash, however, said the card remained usable within
Zimbabwe.
Several banks, including CBZ and FBC, have already stopped
funding MasterCard and Visa card usage outside the country. Most banks have
adopted a pre-funding model, which strictly requires one to make a deposit of
US dollars before accessing the cash abroad.
Zimbabwean companies are struggling to make foreign
payments due to depleting nostro balances. This has resulted in many companies
using unsafe means to get their money outside the country through the use of
crypto currencies like the Bitcoin. One can make online and foreign payments
without a struggle using the Bitcoin. However it has been regarded as unsafe as
accounts can be hacked.
Economist John Robertson said measures being taken by
financial institutions started two years ago and they are only being done to
survive in a worsening economic crisis.
“Such measures signal the scarcity of foreign currency.
There is no foreign currency being poured in the country and therefore the
money will continue becoming less and less. Moreover we are not generating the
money ourselves in any way,” Robertson said.
“Zimbabwe has spoiled its record as a creditor and
therefore we cannot borrow any money as we are known for not being able to pay
back on time. As a country we are losing out on the much needed foreign direct
investment (FDI) which can bring foreign currency.”
Robertson added that there is need for the country to
review its policies in order to attract FDI.
“The foreign currency shortages and the liquidity crunch
the country is facing are all self-inflicted problems. We are doing nothing to
correct the investment restrictions, in which if done, we will see factories
reopening and mines starting to produce for our exports. For as long as
government continues to do nothing the situation will only worsen,” Robertson
pointed out.
Last year, Zimbabwe attracted US$319 million in FDI inflows
a plunge from US$421 million in 2015. Zimbabwe still lags behind its regional
peers such as Mozambique, South Africa and Zambia who registered US$3 billion,
US$2,3 billion and US$469 million, respectively in FDI inflows last year. In
2014, the country’s FDI amounted to US$545 million, showing that investment
amounts have been decreasing over the last few years.
Economist Godfrey Kanyenze said the tightening of forex
allocation signals the worsening economic crisis exacerbated by infighting in
Zanu PF.
“This shows there is non-resolution of issues affecting the
country. The country is hurtling down the precipice with reckless abandon. As
the reshuffle of cabinet last week suggests, there is no room for pretence. The
faces that represented reform such as that of (former finance minister Patrick)
Chinamasa have been removed. There is no room for pretence. All the leopard’s
spots are out. The old man (Mugabe) has slammed the door shut,” Kanyenze said.
“Confidence is needed to revive the economy, but the
reshuffle and infighting in Zanu PF won’t restore confidence.
There will be no resolution to the liquidity crunch and
debt repayment until the election. Until then we are alone.” Zimbabwe independent
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