Fin24 spoke to agents of EcoCash – the biggest and most widely used mobile money payment and transfer platform, owned by Econet Wireless Zimbabwe – who indicated that the premium had risen from around 35% in the previous week to around 55% currently for people seeking hard cash.
Demand for cash in the troubled Southern African country has spawned a massive hike in cash premiums, they said.
In an effort to rally support for the Zimbabwe dollar, the country’s central bank withdrew ZW$400m from the banking system in June, but the move has not halted speculative attacks on the currency and exacerbated the current physical cash crunch.
People looking for cash buy from mobile money agents such as EcoCash. It works as follows: those with electronic balances can withdraw money electronically from their banks and transfer it to their mobile money wallets. Once the money has been transferred to mobile money wallets, it’s then transferred to mobile money agents or dealers, who then charge a premium for cash.
For instance, a person seeking cash amounting to ZW$100 will have to pay ZW$155 electronically or via a mobile payment platform.
An EcoCash agent told Fin24 he sources cash from the black market at a premium and tops up his own spread.
“We source the cash from the black market a slightly lower rate. My spread on this money is not that big. I get commission for all the transactions that I do as an agent,” he said.
Even many retailers in the country have factored in the premium for cash into the price of goods, adding to the mounting costs faced by Zimbabweans.
But this could be coming to end if Reserve Bank of Zimbabwe governor John Mangudya is to be believed.
In his monetary policy statement on Friday, he said the central bank would issue more notes to respond to strong demand for cash.
“The increase in the demand for physical cash has worsened cash shortages, as reflected by unending queues at most banks in the country.
“In addition, visitors to the country, including tourists, are failing to access cash for their domestic transactions, as they are supposed to buy local currency cash from banks or bureaux de change,” Mangudya said.
“Failure to get cash is undermining confidence in the local currency as well as forcing economic agents to resort to the illegal transactions in foreign currency and to selling cash at a premium.”
Mangudya said based on the country’s historical cash levels and that of neighbouring countries, the currency in circulation is estimated to be around 10-15% of broad money supply.
“The Bank will continue to inject additional notes and coins on a gradual basis, to […] lessen the inconvenience caused by physical cash shortages to the transacting public,” Mangudya added.
He warned the cash injections would not result in an increase in money supply, as banks would use existing RTGS (real-time gross settlement) balances for cash.Post published in: Featured