THE Central Bank has scrapped the US$10 000 cash withdrawal limit citing improving liquidity conditions although authorities also conceded that the measures would likely result in depositors shunning the formal banking system.
Treasury and the Reserve Bank of Zimbabwe (RBZ) ordered the limit on instant cash demands as well as notice periods for larger withdrawals last month as banks struggled under a worsening liquidity squeeze.
But in a recent economic review statement Finance Minister Tendai Biti admitted the potential downside of the measure stating that: “The Government has noted that we move with circumspection with regards to the restrictive limits on withdrawals, that way also avoiding inculcating cultures that could see some persons shunning the banking sector.”
RBZ chief, Gideon Gono subsequently announced that the withdrawal limit and notice periods would be scrapped with effect from March 1, 2012 as the country’s liquidity crisis continued to ease.
“In view of the improving liquidity situation in the economy and the need to encourage savings and use of the formal banking system, the Reserve Bank will be lifting the previously announced cash withdrawal limits with effect from 1 March 2012,” Gono said in a statement last Friday.
“Banks are encouraged to continuously apply the Know Your Customer (KYC) principle in order to avoid the abuse of cash.”
Biti also said the liquidity situation had improved considerably after banks complied with an order to repatriate 75 percent of funds held in off-shore accounts.
Treasury also released into the economy about US$120 million secured from the country’s facility at the International Monetary Fund (IMF).
Biti said banks had so far repatriated US$71 million since the order was issued adding treasury expected the remaining US$127 million to be brought back this week.
“This shows us that you can get more out of dialogue with the market than through ‘jambanja’ and this money is going to be used for the productive sector,” Biti told a recent parliamentary committee on Budget, Finance and Investment Promotion.
The minister also said the country financial services sector should also promote alternative means of payment to ease the demand for cash.
“In order to complement measures meant to support improved liquidity in the market, it will be necessary that businessmen and the general public broaden use of plastic money and that way reducing reliance on cash,” he said.
“Government is, in consultation with the Reserve Bank and the Bankers Association, considering introduction of measures and fiscal incentives deemed necessary to promote broader use of plastic money.”