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News: Rampant cash hoarding regress improved banking services in Tigray,  cash shortage persists after central bank dispensed 5 billion birr

Mekelle city, Tigray (Picture: FBC)

By Mihret G Kristos @MercyG_kirstos

Addis Abeba – Banks in Tigray are facing cash shortage and therefore significantly limited the amount of money one can withdraw due to widespread cash hoarding after the central bank dispensed 5 billion birr to Tigray in February.

The decision had enabled banks to resume their much-needed services amidst growing complaints from residents who despite re-opening of banks in the region were unable to get services due to shortage of cash. The services however are short lived.

A bank manager at one of the private banks in Mekelle, capital of Tigray region, who asked not to be named, told Addis Standard that traders and the rich have withdrawn all their money in cash in the first two weeks after the central bank sent 5 billion birr cash to Tigray.

At the time, “we have been providing withdrawal services according to the central bank’s standard, allowing an individual to withdraw up to 50,000 birr cash per day. In the first two weeks branches have been withdrawing up to 30 million birr everyday,” he said. 

According to him, the withdrawals were done through multiple methods such as transferring smaller amounts of money to several accounts including to friends and family members and collecting from them after they withdraw the cash.

He also said due to mistrust in banks, and fears that banks might be shut down again business transactions in Tigray are fully made in cash. “Even traders from other regions who bring commodities like Teff to Tigray won’t accept bank transfer but cash” the manager said.

“There is only withdrawal, with a very rare and small amount of deposits,” said the banker.

Residents say individuals who managed to hoard a significant amount of cash early enough are brokering it with an additional charge.

A resident of Mekelle who also asked not be named told Addis Standard that he bought a cash of one million birr from brokers which he needed to buy a car.

“I have the money in my account but I cannot withdraw it, and the person I am buying the car from wants it in cash. So I transferred the one million birr to a broker with an additional 2.5% charge, and he[the broker] gave me the cash after he received text confirmation that the transfer was made.”

People are wasting their time finding cash to buy a car or a house and are exposed to additional charges in doing so, he noted.

Addis Standard spoke to multiple other residents of Mekelle who complained about difficulties of buying goods as a result of shortage of cash and reluctance among the traders to receive transactions through banks. 

According to the residents one has to wait for three weeks to buy a good that costs 10,000 birr as the banks now allow only 5000 birr to be withdrawn in a week, and brokers ask up to 3.5% extra charge for that amount.

The decision to send 5 billion birr to Tigray was made following engagements of the Peace negotiating teams of the federal government and the Tigray Region who met on 03 February, in the presence of Prime Minister Abiy Ahmed (PhD) for the first time and discussed the progress of the implementation of the peace agreement signed between the two in November last year.

In his remarks in the aftermath of the meeting, the leading peace negotiator of Tigray region, Getachew Reda, underscored that, “banks have opened in Tigray but due to serious shortage of cash they haven’t been giving services” adding that, “in Tigray people who have money become dependent on aid only because they cannot access their savings”.

Residents complain that banking service has now returned to where it was before the central bank dispensed the 5 billion birr to Tigray a month ago. AS

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