Zimbabwe's central bank set priorities for imports and imposed limits on cash withdrawals on Wednesday, in an effort to ease an acute shortage of money, as the IMF said the country's economic difficulties had worsened after a devastating drought. Hyperinflation led Zimbabwe to abandon its own currency in 2009 for others, including the US dollar, British pound and Chinese yuan. But it has grappled with a shortage of notes since March, which the central bank at first attributed to financial institutions underestimating demand.
Starting Thursday, Reserve Bank of Zimbabwe Governor John Mangudya told reporters, banks would give priority to imports of raw materials, machinery, fuel, basic food and healthcare products, and dividend payments to foreigners. Banks will supply importers of those goods with cash before they provide any to importers of non-priority goods.
"This policy will ensure that the available foreign exchange resources are efficiently appropriated towards those sectors of the economy with capacity to generate the much-needed liquidity," Mangudya said. Daily cash withdrawals and cash to be taken outside the country by individuals will be capped at $1,000, Mangudya said, to encourage the use of electronic payments. Forty percent of all export earnings will be converted to South African rand and 10 percent to euros, to increase the use of both currencies, he said. Remittances from diaspora and non-governmental organisations will not be affected.
Mangudya said Zimbabwe had no plans to re-introduce its own currency, but the central bank would in future circulate special "bond notes", equivalent to US dollars in value, to pay a 5 percent incentive to exporters. Zimbabwe already has "bond coins", equivalent in value to US currency, that were introduced in December 2014 to ease a shortage of change in the economy.
Mangudya blamed the cash shortfall on a decline in export earnings caused by low mineral commodity prices, rising imports and a weakening of the rand. They all had led to high demand for dollars, he said. But cash shortages are just the latest scourge in a country that has struggled to rebuild its economy after a decade-long collapse that started in 2000. The crisis was worsened by a withdrawal of Western support over charges of vote-rigging and human rights abuses against President Robert Mugabe's government, accusations which the veteran leader denies.
On Wednesday, the International Monetary Fund said Zimbabwe's economic woes had deepened after drought weakened agricultural production and disrupted hydro power generation. "Unless the country takes bold reforms, the economic difficulties will continue in (the) medium-term," the IMF said in a statement after consultations with Zimbabwean officials. Finance Minister Patrick Chinamasa earlier told parliament that the IMF had indicated during a board meeting this week that it was satisfied with Zimbabwe's performance, paving the way to implement plans to clear debt arrears with the global lender.