Previous Year Questions

Question :

Directions : Read the following passage carefully and answer the questions that follow.

Working in a bank in Zimbabwe illustrates the tensions of an economy that relies on both the U.S. dollar and the Zimbabwean dollar (ZWL). The U.S. dollar is the preferred medium for most daily transactions, while the local currency struggles for credibility. Although the Reserve Bank of Zimbabwe introduced the ZWL in 2019 after the collapse of bond notes, it quickly faced steep depreciation. By early 2023, the official rate often differed significantly from the parallel market, with the latter trading at more than double the official rate. This gap places bank employees in a complex position, as they process deposits and withdrawals in two currencies that hold very different levels of public trust. Customers frequently insist on dollar transactions, leaving local currency accounts underused and staff caught between market realities and regulatory instructions.

Inflation compounds these operational strains. Zimbabwe's annual inflation rate, which had eased somewhat in late 2022, accelerated again in early 2023, reaching over 229% in January. Even when monthly rates showed temporary moderation, volatility persisted, especially in food and fuel prices. The U.S. dollar, long viewed as a safeguard, became increasingly expensive in everyday use, putting pressure on households and businesses alike. For bank staff, updating loan schedules, adjusting service charges, and observing changing client behaviour became part of everyday work. Inflation, whether in ZWL or in dollars, undermined financial planning and blurred the distinction between the supposedly stable and the unstable currency.

Customer attitudes reveal another dimension. Many account holders attempt to withdraw in dollars regardless of the denomination of their deposits, while others avoid formal banking altogether, preferring to hold cash privately or trade in informal markets. Memories of the hyperinflation era of 2008 - 2009 fuel mistrust of official systems. To limit pressure on scarce dollar supplies, banks enforce withdrawal ceilings, sometimes leading to disputes at counters. In practice, this turns ordinary transactions into negotiations over access and fairness. Employees must carefully explain why limits exist, even when they sympathise with clients whose purchasing power is ____X____ day by day. The mismatch between customer needs and banking rules creates friction that staff cannot easily resolve.

Policy actions form the fourth layer of this environment. The Reserve Bank of Zimbabwe has attempted to stabilise the ZWL through measures such as tightening money supply, raising interest rates, and introducing gold coins in mid-2022 to provide an alternative store of value. Such steps aimed to slow down inflation and restore confidence, but they also restricted credit and discouraged borrowing. Commercial banks were required to align operations with these directives, revising interest rates and reporting systems accordingly. For employees, this meant turning routine work into a continuous process of adjustment, as policies shifted in response to inflation and currency fluctuations.

According to the passage, how did customers' behaviour add to banking difficulties in Zimbabwe?