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Zimbabwe: Cash Shortages Resurface
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Financial Gazette (Harare)
27 March 2008
Posted to the web 27 March 2008
Harare
ZIMBABWE'S cash shortages resurfaced during the week with several banks again battling to dispense cash to depositors despite huge cash injections into the system by government.
Banking sector sources said demand for cash was increasing with escalating inflation, creating pressure on banks.
The sources said unlike the last cash crisis that had been precipitated by insufficient collateral by financial institutions to enable them to withdraw enough cash to meet daily requirements by their own customers, the current situation was mainly a result of inadequate notes on the market.
However, a few banks did not have sufficient collateral to secure accommodation from the central bank to enable them to pay depositors, and were battling to source cash from the interbank market to avoid borrowing under the unsecured facility, which has penal interest rates.
The central bank has deliberately kept the market awash with cash and avoided sweeping the market to curtail an intensification of the cash crunch.
The Reserve Bank of Zimbabwe temporarily suspended the Non Negotiable Certificate of Deposit (NNCD) by the Reserve Bank of Zimbabwe after financial institutions showed signs of stress during the peak of the liquidity crunch that began during the close of the previous year.
The NNCD's are normally used to mop up excess cash on the market.
Dealers said bank treasuries were concerned by the uncertainty on the market, which was second-guessing the intentions of the central bank regarding its plans on the money market.
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There was speculation the NNCD's could be re-introduced, but some dealers said bankers were properly deploying their cash and were not responsible for the excess liquidity created by excessive government expenditure.
Therefore, the central bank could not penalise them for excess liquidity emanating fron it, they said.
"There is strong sentiment in the market that the RBZ may introduce shorter term Treasury bill paper since it has managed to restructure government's domestic debt into the long term," an analyst with Kingdom Stockbrokers said.
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