Cash burning is returning to Zimbabwe as liquidity challenges persist


Zimbabweans have begun the practice of “burning” cash, as local businesses try to find new ways of coping with the prevailing liquidity crunch in the economy.

The development is currently only hatching but has the potential to spread further across the economy, and is highly reminiscent of the unforgettable events of 2008, the climactic year of Zimbabwe’s economic crisis.

Burning is essentially a form of selling hard cash on the black market to those who are desperate enough to pay a premium for it. If someone has a $1000 in cash, and the next guy wants that cash 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 write 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. The more transactions the seller gets into (in full-blown crises, these can be dozens of transactions per week) the more profit he makes. Creating money from other money. Hence the term “burning.”

The seller in that case is presumably someone who would not have a problem accessing the cash from their account should they ever need it.

We have received reports from three small business operators in Zimbabwe who have already gotten much-needed cash via burning, all in the past month.

Source A:

“I have been charged 5% and 10% on two separate occasions within the past three weeks. My bank limited my withdrawal to $200 per day, but I needed more than $1,000 at one go, and on the other occasion, $2,000. So I burned.”

Source B:

“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.”

A lot of local banks, lacking liquidity at home and stocked-up NOSTRO accounts abroad, are simply unable to be the financial intermediaries when account holders want to purchase goods from other countries.

zimstreetPut in such a corner, the small businesses, such as Source B above, are resorting to burning. The guy with money in a foreign bank account cannot access it as cash in Zimbabwe.

Many of the guys with cash are facing a lot restrictions and difficulty in getting that money to buy goods for them abroad, (especially by means of telegraphic transfers). So the first guy buys good for everyone using his foreign account, receiving cash and a premium for his trouble in exchange.

This – the fact that the liquidity crunch and policies put in place to ease it would hit importing small businesses really hard – is exactly what many observer and analysts pointed out when the central bank announced the forthcoming introduction of bond notes.

The ordinary man will not be spared

In a normal economy, burning does not exist. Where it exists, it is extortionate to those who are forced to access funds they already own at a premium that isn’t a service or transaction fee. The evidence we have seen so far shows that small businesses are the ones already being compelled to get into burning.

But the ordinary Joe (or Nhamo) is not insulated, and will not be spared. We have already noticed that several banks have begun bringing down the withdrawal limits; the average withdrawal limit on most banks today is between $200 and $300 per day, although before the crisis the rates were much higher (NMB have, as of today, reportedly lowered their $200 daily withdrawal limit further down to $100.)

For any transactions where most people will need cash – especially running expenses such as rent and fuel and utilities, let alone the buying of durable goods such as furniture – many Zimbabweans could be forced to burn cash in order to make it.

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