The Sub-Saharan African country of Zimbabwe has been hit by a serious liquidity crunch as many people are failing to access their monies from the banks.
Some economic experts in the country have attributed this crisis to the festive season that has stimulated demand of goods and services and fears of price hikes are now looming.
There are also fears that this liquidity crunch could ultimately lead to the collapse of some banks as long winding queues, last seen during the 2008 meltdown when the Zimbabwe dollar was still in use, are now the new order.
In Harare’s Central Avenue, one of the locally-owned banks has been battling severe cash shortages for the past month, which the bank`s officials blame on depositors not making regular deposits.
“We are not sure how long the situation will continue for; it is really a wait-and-see approach,” said a banking official who asked not to be named.
On the other hand, Retailers and customers have bemoaned the liquidity crunch that they fear might dampen this year’s festive period.
Retailers from across the sectors expressed doubt that business will pick up, adding that this year’s festive season might be depressed.
The consumers said though the prices of goods on many shelves have remained stable and reasonable, it is the cash that is not available.
“There is no cash in the banks and we do not know what we are going to do during this festive season,” said Gift Taderera, a consumer.
Other analysts say the under performance of the country`s exports has meant that the country imports more using the little money available.
Countries normally plug the trade deficit hole through foreign direct investments and money from donors but Zimbabwe is struggling to tap into foreign direct investment inflows as investors are wary of the indigenisation legislation which are not favourable for them.
Economists define a liquidity crunch as a time when cash resources are in short supply and demand is high.
During a liquidity crunch, also known as liquidity crisis and credit crunch, businesses and consumers are charged high interest rates on loans which are more difficult to obtain.
Comments
About Author
