RBZ seeks to ease cash-crisis

HARARE - Reserve Bank of Zimbabwe governor John Mangudya says the country is working on a raft of measures to ease a month-long cash-crisis that has seen depositors getting daily withdrawals as little as $20 from banks.

The country, which adopted a basket of currencies dominated by the United States dollar in 2009, is facing an acute liquidity crunch due to a widening trade deficit and lack of production.

However, Mangudya said the monetary authorities were working around the clock to ensure depositors get their money on demand.

“We are importing more cash to meet the demand but unfortunately, it’s not an overnight thing. There is a lead time between placing an order and receiving the foreign currency,” Mangudya said yesterday during a hastily-arranged meeting with the parliamentary portfolio committee on Finance and Economic Development.

He added, “…we are also working with Afreximbank to put in place a nostro stabilisation fund…we are also talking to the business community to put in place a priority list of importation to prioritise use of forex and mitigate the country’s trade deficit.

“As a bank, we are advocating for make and buy Zimbabwe campaign. There is a Buy Zimbabwe campaign but we need to go beyond that. The missing link in this economy is production. If we produce more goods and services, it means we will reduce import dependency, meaning there is more money available to Zimbabwe . . . we are happy with the openness of Zimbabwe, programmes being put in place by government but I think we need to do more.”

The RBZ supremo encouraged the public and companies to resort to the use of plastic money to reduce the cash demand.

Mangudya called on banks to incentivise their clients by carrying some of the transactions for free or at least charge a reasonable fee.

Mangudya said the central bank had imported $145 million over the last three months, “which under normal circumstances is supposed to be sufficient for this economy.

“This year only, the banks imported $118 million from January to April 6. We as the central bank have put in $145 million in the last three months alone, but go check in the bank that money is not there, it’s been taken because we are very attractive. How many of you have ever banked new monies?” he asked.

“...so this is about the fundamental principles of policies. That’s why we believe money is there but it’s not circulating.”

While acknowledging that the demand for cash had escalated due to salaries, drought-induced imports and other competing necessities, Mangudya felt lack of “smart policies” had also spawned speculative transactions.

The chicken farmer said competing demands such as drought-induced imports had escalated the liquidity crisis affecting the sector which is already reeling from a $2,5 billion trade deficit.

The frank governor said the demand phenomenon could only be addressed by breeding confidence, trust and international re-engagement.

“...the reason we are where we are today is because we are a consumptive economy, we have to change our mind-sets, to transform this economy we have to produce before we consume,” he said.

“Our current bank balance is negative.  So we can talk all we are saying but we need to have more production . . . so it means our policies should address that . . . all other things are symptoms of the problem . . . we are an attractive source of foreign exchange in the region but we don’t also attract it ourselves. We are an open economy which is closed . . . so we need to look for policies that retain money in the country not to attract other people to take money from us,” he added.

Mangudya outrightly dismissed the re-introduction of the Zimbabwe dollar, saying at the moment it would have dire consequences that would plunge the country into a crisis of monumental proportions.

Comments (1)

Print more money. Ofcourse you can photo copy USDs and start trading internally or better still ask your all-weather Chinese for pemission to print their currency (I forgot its name). Since you are looking east they will be very amused with this idea.

Masamba Akareyo - Tanganda - 9 April 2016

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