Banks start issuing chequebooks again

Aug 17, 2009, 10:49 GMT

Harare - Zimbabwe's gradual recovery from economic collapse was marked Monday with the return to the country's banking system of one of the rest of the worlds most basic business instruments - the cheque.

The Bankers' Association of Zimbabwe said in a statement that local commercial banks would start with immediate effect to issue their customers with chequebooks, for the first time in over a year. Until now, business has been almost exclusively with foreign cash.

Economic chaos brought about by President Robert Mugabes reckless policies of rigid price controls and printing of vast quantities of banknotes, reached its worst point early this year with inflation hitting 50 billion per cent and the national currency, the Zimbabwe dollar, plummeting to a sextillionth of a US dollar.

Bank transactions ground almost to a complete halt, except for sporadic issues of the Zimbabwe dollar, while business was conducted nearly exclusively in cash black market deals with the US dollar.

As the value of the Zimbabwe dollar fell drastically over single days, payment by cheque - taking several days to clear - became pointless. Even same-day electronic transfers were stopped because of sharp falls in the Zimdollars value between morning and afternoon.

The crisis was dramatically halted after the inauguration in February of a power-sharing government between Mugabes ZANU(PF) party and opposition leader Morgan Tsvangirais Movement for Democratic Change.

The MDC took over the finance ministry and immediately abolished the Zimbabwe dollar and established the US dollar and the South African rand as official legal tender. Inflation is now about three per cent.

Commercial banks closed clients' Zimbabwe dollar accounts and allowed them to open fresh accounts in hard currencies.

However, business executives say the return to banking normality has been slow, because of a critical shortage of US dollar and rand cash, and because Zimbabweans' reluctance to put money in foreign currency-denominated accounts.

This followed a scandal last year when it emerged that the central bank, controlled a Mugabe crony, had stolen hundreds of millions of US dollars out of foreign currency accounts to prop up Mugabe's bankrupt regime.

In a reflection of the severe shortage of cash, the Bankers' Association said chequebooks would be denominated in US dollars, but that personal account holders could issue cheques up to a maximum of only 200 US dollars, while companies could write them up to 500. The limits would be reviewed from time to time, it said.