WITHDRAWAL OF MONEY FROM BANKS
6. HON. SEN. NYATHI asked the Minister of Finance and Economic Development: –
(a) to indicate when the banks would be in a position to allow depositors to withdraw any amount of money from their bank accounts without limits
(b) to state measures in place to ensure that people do not spend their productive time in long queues just to withdraw money which is as little as US$50.00 per day.
THE MINISTER OF AGRICULTURE, MECHANISATION AND IRRIGATION DEVELOPMENT (HON. DR. MADE) on behalf of THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Mr. President, the fundamental reason of limiting cash withdrawals is to ensure that the available physical foreign exchange cash is evenly spread to the banking public given the fact that the demand for cash is higher than its supply. The shortage of cash is not caused by banks or the Reserve Bank. The shortage of cash is a symptom of a combination of structural challenges besetting the national economy namely fiscal deficit, current account deficit, market discipline and low productivity.
Fiscal deficit reflects that expenditure is larger than revenue. Excess expenditure over revenue causes cash shortages as it means reliance on overdraft to access the scarce foreign exchange. This is double tragedy which must be addressed.
This situation is exacerbated by the current account deficit which shows that Zimbabwe is a net importer. This requires foreign exchange to meet the excess imports over exports. The foreign currency shortage is further compounded by the glaring market indiscipline. The practice by some traders, including foreigners operating within the Reserved Sectors of the economy, to operate without banking accounts is unethical business practice that should not be tolerated in this country. Non-banking of cash by such unscrupulous traders has a haemorrhaging effect on the circulation of money in the economy.
As I advised this House before, money like blood needs to circulate for any economy to survive and grow. If money that is in the national economy amounting to around $760 million (11.7% of total deposits), made up of $140 million of bond notes, $23 million bond coins and an estimated $600 million of multiple currencies, was circulating efficiently, there would be no cash shortages in the country – a range of 10 – 15 percent of deposits in an economy is the best practice for cash in circulation in most economies throughout the world including developed countries.
It is the traders and individuals who are operating in the shadow economy that are therefore exacerbating cash shortages whilst at the same time externalising cash and also feeding the parallel markets. They do not pay taxes as well. They are abusing the privilege of operating in the Reserved Sectors of the economy.
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