Cash crisis: Chinamasa concedes failure

FINANCE Minister Patrick Chinamasa has conceded the country’s recurrent cash crisis would not go away anytime soon adding that locals still did not trust the formal banking channels.

Addressing backbenchers in parliament recently, Chinamasa said the cash crisis has come as a blessing in disguise as the larger majority of the transacting public has, by default, migrated to electronic systems which he said helped minimise corruption.

The treasury boss said cash shortages were a product of an inefficient circulation of money arising from loss of confidence and trust.

He further said in most jurisdictions, cash based transactions constituted about 10 – 15 percent of the total quantum of transactions.

He added, “In our situation, we are at 16% and even when we are at 16%, that money is not circulating.”

Chinamasa said locals have shown a lot of mistrust towards banking institutions.

“Even if the central bank governor were to pump billions, whether of bond notes or of US dollars, that money is withdrawn and it is never re-deposited in the banks,” he said.

“When you have that scenario or that situation where money is just being withdrawn and not being re-deposited, it means that it is not circulating.

“The circulation is inefficient and you cannot run the economy that way. Now, when we inquire into the reasons, it is actually boiling down to lack of trust and confidence.”

The minister said the current cash crisis has however come as a blessing in disguise as it helped government encourage locals to adopt the often hassle free electronic forms of transacting.

“Some of the challenges about cash shortages are assisting us to push and change the mindset of our people to accept transacting business through electronic and mobile transfers.

“As I speak to you, of the $97 billion transactions that were made last year 95 or 96 percent was electronic and the balance was through cash.

“Again indicating and illustrating the success of the movement towards settling claims of payment electronically.”

Chinamasa said electronic transfers were a good method of controlling rampant corruption in the country.

“Because as we try to fight corruption,” he said, “much of the corruption is promoted through usage of cash, people moving with suitcases of cash and so on to bribe people.

“When transactions are done electronically, there is a paper trail which inhibits those who would want to commit corruption.”

The country has been grappling with the shortage of cash since 2016 leaving locals exposed to a three tie transacting system which has seen products acquired via electronic transfers cost much higher than cash based transactions.

Ex-President Robert Mugabe once told state media that he was among those who stashed their cash in their bedrooms just like many locals who did not trust local banking institutions.

His remarks elicited strong rebuke from former Finance Minister Tendai Biti who scolded the once powerful leader for ruinous policies that have reduced the once vibrant economy into an informal jungle.