Zimbabwe Banks Feel The Pressure

Life is not all rosy for the global banking fraternity with banks in Zimbabwe struggling to keep pace with an economy spiraling into the abyss while the Government clutches tightly to a sinking ship.

With many consumers transacting via a dozen bank accounts to bypass Robert Mugabe’s efforts to restrict daily cash limits of $1.5 million Zimbabwe dollars, banks are being placed under enormous pressure to keep the system afloat.

In addition to the administrative nightmare the banking industry is having to endure, the bank’s own employees are also placing pressure on the nation’s financial institutions in a bid to maintain their wages and keep track with the sky rocketing costs of living.

In mid-July the Zimbabwe Banks and Allied Workers’ Union (ZIBAWU) and the Bank Employers’ Association of Zimbabwe (BEAZ) failed to reach a consensus over the cost of living adjustments for the month - raising fears of industrial action and a subsequent likely full scale melt down of the economy.

So while the global economy is only now moving away from an economic backdrop of historical prolonged low interest rates and low inflation, this has not been the case in Zimbabwe for some time, where holding on to money is equivalent to throwing it away as a pint of milk and a loaf of bread (if you are lucky to find them) will be many times more expensive the following day to what you may pay today.

The overnight cash interest rate on the Reserve Bank of Zimbabwe’s website is 600% while the bank ceased calculating inflation in April when it was recorded at an arguably conservative 3,713.9%.

Ironic perhaps for an institution whose own mission statement is the formulation, implementation and monitoring of policies and action plans for fighting inflation, stabilisation of the internal and external value of Zimbabwe’s currency.

Analysts place the inflation rate in Zimbabwe at 20,000% – the Government’s figure is 4,500%.

Official efforts to force traders and sellers to sell their goods at lower prices will undoubtedly prove futile for a nation teetering on the brink.

Several foreign banking groups currently operate out of Harare, such as Barclays Bank of Zimbabwe, Societe Generale Bank and Standard Chartered Bank.

The future of their operations in Zimbabwe remains to be seen.