When Jim Chanos said earlier this week that days ago that sub-Saharan Africa is facing a severe cash shortage (mostly as a result of their collapsing oil export revenue) he probably did not have the economic basket case of Zimbabwe in mind, and yet this is the country which, after years of monetary and economic collapse “problems”, including the occasional bout of hyperinflation, finds itself in the most dire situation.
As News24 reports, just this past week, Zimbabweans formed long queues outside banks on Thursday as a cash shortage prompted the government to announce plans to print a local version of the US dollar and limit withdrawals.
Indeed, it appears that Zimbabwe is about to unveil yet another monetary experiment in which it will print its own version of the US dollar, as an ailing economy fuels a severe cash shortage.
John Mangudya, Zimbabwe’s central bank governor, said Thursday the so-called bond notes will be backed by $200 million in support from the Africa Export-Import Bank, according to the Herald, a local government-owned newspaper. He also announced restrictions on cash and ATM withdrawals, as well as limits on how much cash people can take outside the country.
In its statement, the central bank explained the cash shortage as follows:
The shortage of USD cash in the country as evidenced by queues at some banks and automated teller machines (ATMs) is attributable to a number of intertwined factors that include:
The dysfunctional multi-currency system as a result of the strong USD. In the case of Zimbabwe, the USD has become to be more of a commodity, a safe haven currency or asset than a medium of exchange.
Low levels of use of plastic money and the real time gross settlement (RTGS) platforms. Zimbabwe is predominantly a cash economy.
Low levels of local production to meet consumer demand, leading to higher demand for foreign exchange to import consumer goods.
Low consumer and business confidence as reflected by high appetite by both consumers and business to keep cash outside the banking system.
Inefficient distribution and utilization of scarce foreign exchange resources.
“It is not an overnight process,” Mangudya told the Herald when asked what date the bond notes will be issued. “We are still working on a design which will be sent for printing outside the country. The notes will not be introduced immediately but probably within the next two months.”
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