News:Cash burning returns to Zimbabwe
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Zimbabweans have started the 2008 practice of burning cash amid the liquidity crunch. Burning by definition is a form of selling hard cash on the black market to those who are desperate enough to pay a premium for it. For example if someone has $1 000 in cash, and the next person is in need of the same amount but is unable to withdraw it from the bank because of shortages or restrictions, the two can make a deal. The buyer receives the $1 000 in cash and then proceeds to wire the same amount, plus an agreed upon premium (a markup), to the seller’s account. Wiring $1100 into the account of the seller would represent a 10% markup.
This scenario is currently affecting those with businesses especially those that source their merchandise across the borders. An example is that of an unnamed business person who said that,
"I sell gadgets in town, and I have to buy them from outside; it’s difficult for me to use funds in my local bank to purchase good outside Zimbabwe. So a guy with a foreign bank account offered to help me, in exchange for cut."
The situation is expected to affect the ordinary Zimbabwean following requests by bankers to limit withdrawal limits to $500 a week from the $1 000.
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