Zim’s bank crisis mounts despite drastic price cuts

HARARE – Prices of some commodities, particularly furniture and electrical goods, have started dropping drastically in Zimbabwe, but a crisis in the banking sector continues to hound depositors.

Economists say businesses are trying to raise as much cash as they can to invest on the money market, where interest rates have shot to more than 700 per cent. Retail shops, awash with goods that had been stocked up last year in anticipation of huge Christmas sales which did not materialise, have started reducing their prices.A leading furniture retail group with more than 30 shops across the country, this week started offering a 40 per cent discount on all its merchandise on sale, a move not seen in the country in recent years.Zimbabwe’s prices have been on an upward trend since the 1990s, with inflation galloping from around 50 per cent 30 months ago to more than 600 per cent now.Some retailers are reducing prices due to the introduction on January 1 of a value added tax (VAT) which is seeing some goods that were taxed at 25 per cent under the old sales tax system now attracting a lower rate of 15 per cent.Foreign exchange rates on the parallel market – on which virtually all foreign currency business is traded – have plunged with one greenback now buying about 4 500 Zimbabwe dollars, compared to 6 200 early last month.Meantime the banking sector, which has been gripped by a crisis since the closure on New Year’s Day of a leading asset management firm which allegedly defrauded its clients of billions of Zimbabwean dollars, has left many current account holders in the cold as their cheques are no longer accepted for payment of goods and services.Supermarkets, companies and the capital city’s municipality have blacklisted at least six recently established commercial banks, rejecting cheques drawn on them.Several banks have been experiencing liquidity difficulties in recent days after the central bank recently launched a probe into their operations believing they were involved in clandestine speculative activities.The liquidity crisis comes just months after a severe four-months-long shortage last year of bank notes that forced the government to introduce several forms of payment, including bearer cheques and local traveller’s cheques.-AFPRetail shops, awash with goods that had been stocked up last year in anticipation of huge Christmas sales which did not materialise, have started reducing their prices. A leading furniture retail group with more than 30 shops across the country, this week started offering a 40 per cent discount on all its merchandise on sale, a move not seen in the country in recent years. Zimbabwe’s prices have been on an upward trend since the 1990s, with inflation galloping from around 50 per cent 30 months ago to more than 600 per cent now. Some retailers are reducing prices due to the introduction on January 1 of a value added tax (VAT) which is seeing some goods that were taxed at 25 per cent under the old sales tax system now attracting a lower rate of 15 per cent. Foreign exchange rates on the parallel market – on which virtually all foreign currency business is traded – have plunged with one greenback now buying about 4 500 Zimbabwe dollars, compared to 6 200 early last month. Meantime the banking sector, which has been gripped by a crisis since the closure on New Year’s Day of a leading asset management firm which allegedly defrauded its clients of billions of Zimbabwean dollars, has left many current account holders in the cold as their cheques are no longer accepted for payment of goods and services. Supermarkets, companies and the capital city’s municipality have blacklisted at least six recently established commercial banks, rejecting cheques drawn on them. Several banks have been experiencing liquidity difficulties in recent days after the central bank recently launched a probe into their operations believing they were involved in clandestine speculative activities. The liquidity crisis comes just months after a severe four-months-long shortage last year of bank notes that forced the government to introduce several forms of payment, including bearer cheques and local traveller’s cheques.-AFP