At the beginning of this year the Reserve Bank suddenly imposed cash withdrawal limits on local bank accounts. The limit was US$10 000 a day. That may not be enough for Grace Mugabe, but for most of us it represented a ceiling so high that it made little impact. However, in the closeted halls of commerce, the signal was taken as the first shot in yet another crisis management effort by the authorities.
They were right. Cash withdrawal limits were steadily reduced until about two months ago they were set at $500 a day and in reality the markets had already taken control and most banks were simply unable to maintain even this new limit. Today the largest bank in Zimbabwe is restricting withdrawals to $40 a day and even then they run out of money. Queues stand silently outside all Banking Halls and ATM’s from early morning.
When we adopted the dollar and the Rand as our currencies of trade in February 2009 after experiencing inflation at world record levels, the needed cash to make the system work simply emerged and took over – in day’s fuel and food was in free supply after years of shortages. In weeks all retails stores were fully stocked and trade was brisk.
In the next 4 years under a Government of National Unity with an MDC Minister in charge of the Ministry of Finance, there were no cash shortages, fiscal discipline was maintained and the formal economy recovered by a factor of 14 in four years – State revenues rising from $280 million in 2008 to $4 300 million in 2013.
Then Zanu PF took back control of the State in July 2013 and suddenly our world began to fall apart – again. In weeks we went from a cash surplus in the budget to a deficit of $500 million. In months we saw state expenditure on staff costs rise from 60 per cent of revenues to 85 per cent. The following year the deficit in the budget expanded to a billion US dollars – repeated in 2014 and 2015. Like the days of reckless printing of money, the Government simply issued Treasury Bills.
This took billions of dollars out of the economy and replaced them with paper. Normally such paper has real value in an economy and are traded and regarded as a prime asset. In Zimbabwe they quickly lost value, firms selling them at discounts up to 40 per cent and then when they were presented for payment, the State simply rolled them over and issued new paper to replace the matured Bill’s. They were still held in balance sheets as an asset at full face value, but the reality was that unless something drastic happened to get the country back on its feet, they were nearly worthless.