HARARE, June 4 (Xinhua) -- In the Zimbabwean capital Harare, a pervading sense of despair and anguish engulfed the public who had to spend hours on end trying to access their cash from banks and fight for price hikes of their daily necessities.
A Zimbabwean man displaces his old notes inside a bank in Harare, Zimbabwe, June 15, 2015. (Xinhua/Xu Lingui)
In the past week, the price of a two-litre bottle of cooking oil had also gone up from about 2.99 dollars to 3.60 while a popular margarine brand had vanished from shops.
Social media, meanwhile, is awash with rumors of impending food shortages and urging people to stock the goods in their homes, buying basic foodstuffs like sugar, soap and cooking oil in large quantities.
The fear is reminiscent of the year of 2008 when Zimbabwe's decade long economic crisis, characterized by long bank queues and shortages of fuel and basic foodstuffs, reached its peak.
Zimbabwe has been facing cash shortages since March this year which authorities blame on money laundering, widening trade deficit and the spreading of government workers' pay day through the month.
But the situation slipped into chaos in early May after the central bank announced measures to limit cash withdrawals and a particularly controversial plan to re-introduce a quasi-currency, called bond notes, to the market dominated by the use of the U.S. dollar since 2009.
The central bank capped the daily cash withdrawal limit to 1,000 U.S. dollars, but less than two weeks, people were only able to cash out 50 U.S. dollars from the ATMs, if they were lucky.
People queue to withdraw their U.S. dollars outside a bank in downtown Harare, capital of Zimbabwe, on May 30, 2016. (Xinhua/Xu Lingui)
A worker at a state-owned enterprise said the cash shortages had made life unbearable for him as he now struggled to pay rent, buy food and pay school fees.
"I go to the bank wanting 500 dollars but I get 50 dollars. I need to pay rent, buy food and pay school fees but how do I do all this with just 50 dollars? I am afraid we are headed back to 2008," said Cornwell Kashininga.
A 22-year-old mother waiting to withdraw money at a city bank told Xinhua that she had been coming to the bank for the past three days but failing to get her money. "Can you imagine coming here early in the morning with my baby on the back in this chilly weather?" she fumed.
Many Zimbabweans are trying other ways to get the money out, including transferring their monies to mobile money accounts and swiping cards in shops for more than they buy, only to get the cash back.
These options are, however, not without their own challenges.
"The supermarkets force you to buy goods of a certain amount, which sometimes may be more than what I want to spend," said 25-year-old Linnet Svosve.
Many have also told Xinhua of their frustrations at failing to get money from Ecocash, a major mobile money transfer service operated by the country's biggest telecoms firm, Econet Wireless.
"Naturally, because of the cash shortage our volumes will be affected but we can't at this stage quantify by how much," the company's spokesperson Lovemore Nyatsine was quoted by financial news service the Source as saying, urging the migration to paperless transaction in the face of a cash shortage.
But current high costs of swiping and lack of bank cards by the majority of Zimbabweans render use of plastic money ineffective.
About 70 percent of Zimbabwe's adult population is unbanked, according to the central bank.
It remains not immediately clear why did the country's cash situation took a deep dive just a matter of a few weeks. Some economists say the government is trying to build up a U.S. dollar balance that it can use to meet external obligations. One of the pressing one is the commitment to pay the arrears of 1.8 billion U.S. dollars owed to the World Bank, the International Monetary Fund, and the African Development Bank by June 30, 2016.
The payment is crucial for Zimbabwe to unlock funding from Bretton Woods institutes after a 15-year-freeze.
While no touching the topic, Central Bank Governor John Mangudya said he was confident the bank queues would end soon as the banks had imported 160 million U.S. dollars in cash since the beginning of the year to mitigate the shortage.
He also urged the public to embrace "bond notes" and reiterated that the notes are not a return of the Zimbabwean dollar and will not replace the U.S. dollar as the main circulation currency.
The bond notes' issuance, set in October 2016, is backed by a 200 million U.S. dollars facility provided by African Export Import Bank (Afreximbank). But the public feared a return of the useless of the Zimbabwean dollar, which was abandoned in 2009 after pushing up an inflation of 500 billion percent.
"Business is very low and people are not coming to the salon because they do not have money," said hairdresser Rose Mbeva who was sitting outside in the sun to beat the cold at a city salon.
"I am afraid I will be forced to close if business remains low because I can't raise money to pay rent. I hope the bond notes will help but I also fearthat the black market will resurface and make things worse. It's better for government to shelve plans to introduce the bond notes," she added.
Her fears were echoed by Peter Muchina, a cross border trader who said he would likely stop his business because he can't use bond notes to buy wares from neighboring South Africa for resale home.
A Zimbabwean woman looks on as she does some shopping at a leading supermarket in the capital Harare (REUTERS/Philimon Bulawayo )
John Mukonyo, a government worker, said the planned introduction of bond notes has made people to adopt a wait and see attitude. Meanwhile, people have begun hoarding basic commodities and at this rate, shortages are likely to start soon if measures are not put in place to contain the panic buying.
Tapiwa Mashakada, an opposition politician, said the bond notes are likely to trigger a black market for foreign currency as witnessed during the decade of economic crisis up to 2008.
"The market will reject their usage as legal tender. The political and economic consequences will be dire," he said.
