The nation of Zimbabwe is setting a global precedent as it moves towards a cash-free economy.
Going cashless is a potential reality for global economies in the future as the world becomes increasingly digitized.
However, in Zimbabwe’s case, the move towards a cashless economy may not be a sign of progress but rather an economic backslide.
Simply, Zimbabwe’s economy is going cashless because the country is running out of money.
One major sign of the severe economic decline came back in 2009. Zimbabwe’s currency had decreased in value so much that the nation’s lawmakers decided to abandon it in favor of the United States dollar.
However, even this last-ditch effort to revive Zimbabwe’s tanking economy has had its cost by fueling economic anxieties.
Fears over not only the state of the nation’s economy but also instability in the political scene has resulted in a number of citizens either smuggling money out of the country or else hiding their money and refusing to invest it in banks. However, these actions have resulted in a further depletion of Zimbabwe’s struggling economy, worsening the monetary crisis.
As a result, Zimbabwe’s banks have been forced to severely limit the amount of money its customers are allowed to withdraw at one time. Similarly, many ATMs sit empty and unusable.
However, with diminishing supplies of cash, new payments tactics are being used. More and more debit card machines are springing up in Zimbabwe’s cities in a variety of locations,including supermarkets, parking lots, nightclubs and businesses.
There are even alternative payment methods in lieu of these debit card machines. Consumers are now able to text their payments to businesses through cell phones.
The shift towards a cashless economy has been fast. The move towards plastic has given Zimbabwe a small boost out of its economic hole dug from decreased commodity prices, a loss of confidence by investors and a severe drought.
For Zimbabweans living in the countryside, the economic blows have been harsher. Without debit card machines, these rural residents have been forced to switch to alternative forms of payment. Often, goods like crops and livestock are exchanged, fueling the re-emergence of bartering.
The economic crisis was set off about a decade ago due to hyperinflation. Fearful that Zimbabwe’s currency would soon devalue, citizens all spent their money in a rush. Meanwhile the government contributed to the currency’s devaluation as it continued to print more bills.
The economic crisis was precipitated by Zimbabwe’s precarious political situation. It has been reported that President Robert Mugabe’s health is deteriorating.
At the age of 92, he is the oldest surviving head of state in the world. However, as his time in office comes to an end, his country is coming to a state of political uncertainty with no successor in line for the presidency.
Amidst major infighting with Mr. Mugabe’s ZANU-PF party, party members have taken advantage of the distraction to milk the economy. Indeed, 97 percent of Zimbabwe’s government spending was used to just pay the government workforce.
However, the solution of moving towards a cash-free economy seems to be favorably accepted by Zimbabwe’s citizens. As such, Zimbabwe’s plans to re-introduce paper payments of any sort have been met with opposition. Zimbabweans are resisting the move, fearful it will only result in a re-introduction of local paper currency and more economic problems.