Zim running out of US dollars

HARARE - Despite the shrill official propaganda to the contrary, Zimbabwe's economy is continuing on its steep decline — with the latest manifestation of this implosion being the alarming disappearance of the much sought-after United States dollars from the market in recent weeks, with devastating consequences for the country.

This latest dose of bad news to hit long-suffering Zimbabweans comes as economists have recently reaffirmed that average incomes in the country are still hovering at their lowest levels in more than 60 years, with the majority of families having to make do with less than $200 a month.

Reserve Bank of Zimbabwe governor, John Mangudya, confirmed to the Daily News yesterday that Zimbabwe was witnessing a drastic shortage of American dollars, blaming rampant externalisation of the coveted greenback for the crisis.

Banking sources also said last night that the critical shortage of the US dollar had escalated ever since the central bank introduced bond notes into the market in November last year, as President Robert Mugabe’s stone-broke government desperately sought to mitigate the country's crippling cash and liquidity crisis.

“It is a fact (that US dollars have disappeared). Nowadays we are importing small denominations because externalisation is high .... smaller notes make externalisation more difficult,” said Mangudya, adding that “generally, in money laundering, people favour high value notes, and so banks are importing smaller notes”.

However, Mangudya also said the country had, at the same time, seen an increase in US$ deposits.

“We have seen a significant increase in US dollar deposits, and in terms of the money in circulation, we have more US dollars in the system compared to bond notes.

“So, people should not be alarmed with the disappearance of high-value notes. It is just one of the measures being implemented against externalisation,” he told the Daily News.

But banking sources said while the $100 and $50 notes had started disappearing at the beginning of the country’s cash crisis, around May last year, the shortage had escalated following the release of the bond notes.

The chief executive of the Zimbabwe National Chamber of Commerce (ZNCC), Takura Mugaga, also told the Daily News yesterday that the disappearance of high-value US dollar notes was being caused by externalisation, pointing out that people were also using the greenback as a store of value.

“You need to note that most people are holding US dollars in their homes and not depositing them, as they seek a strong currency to hold on to,” he said.

But former Finance minister, Tendai Biti, said the disappearance of the high-value US dollar notes was “a direct result of a government-instituted grand theft”.

“What the government is doing through bond notes is that they are swallowing legitimate US dollar balances in the system and stealing the US dollars.

“If you go to the bank and your balance is US$200, but you get 100 Bond and $100, what has happened to the other $100?” he queried.

“We are experiencing what is known as Gresham’s Law, where bad money is replacing good money in the system,” the People’s Democratic Party leader added.

A senior economist with risk and analysis firm IHS Global Insight, Alisa Strobel, added that “the increase of uncertainty over the impact of bond notes to the Zimbabwean economy, and fears we could see a repetition of 2009’s hyperinflation, bodes ill for the economy across the board”.

Although Zimbabwe introduced a multi-currency system in 2009, including using the South African rand and recently the Chinese Yuan, almost all Zimbabweans prefer the greenback to the other currencies.

Prominent economist, Ashok Chakravarti, said recently that a whopping $358 million in cash had been siphoned out of the country in the past five years alone.

He also told a Confederation of Zimbabwe Industries (CZI) gathering in Harare late last year that greenback banking deposits had declined from $627 million in 2010 to $269 million last year.

“We have about US$269 million in banks, which is about six percent of total bank deposits. Cash in the system has depleted compared to deposits ... There has been genuine externalisation. You need to have a non convertible currency to stop externalisation. If you need this country to move you have to have a currency which cannot be externalised,” he said.

And as Zimbabwe’s economy continues to die, the World Bank last year downgraded the country from its list of improved economies to the unflattering tier of struggling countries, as Harare’s political and economic turmoil continues to escalate.

In its publication titled Africa’s Pulse, the Bretton Woods institution said the country had failed to register significant economic growth over the past few years.

“Zimbabwe’s fiscal deficit has deteriorated as remedial actions have been limited and this has resulted in the country registering a negative correlation between the cyclical components of government consumption and GDP,” it said.

Economists say poverty levels have reached “numbing levels”, amid indications that the situation will worsen in 2017, as Mugabe’s Zanu PF government continues to demonstrate its inability to fix the rot.

Comments (19)

iwe ferekisi, unoti totenga neyi iwe uchihwa kuti hakuchina mari

Jesuit Priest - 25 January 2017

Spot on Daily news we were told The country had 200M USD in circulation and less than 30 m bonds printed but to our surprise BONDS ARE NOW MORE THAN the USD and banks are now giving bonds instead of the deposited USD . Some one is playing with here . Banks should give half USD half bonds of withdrawals otherwise we are being crooked again like what they did last time Wives of policemen and ministers are seen with wades of USD notes exchanging foreign currency where are they getting from that money and why are they not harassed by police the same way like combis Who is deadly to our economy the combis or those exchanging foreign currency in the streets .

Diibulaanyika - 25 January 2017

I have always said that very soon the US Dollar will eventually disappear from the market thereby forcing the clueless illegitimate mafia government to print more and more bond paper to meet demand.We all know the results of such a scenario.One bitten twice shy.

Janana wa Bikaz - 25 January 2017

True Diibula now vendors are being harassed for selling tomatoes while spouses of govt officials and police maen just exchange money freely . zim now a banana state

Diibulaanyika - 25 January 2017

Sorry meant say Lanana not DIIBULA

Diibulaanyika - 25 January 2017

the purported shortage of greenbacks is a non event,people in harare and bulawayo are already transacting using the bond note without any hassles,the governor mangudya must just increase circulation of bond notes with higher denominations,we are tired of people coming to zimbabwe to harvest dollars masquedering as investors,now that we have a currency thats cannot be externalised they cry foul,if i may ask @diibulaanyika,which united states dollars did you earn for yu to thinkl yu are entitled to the the united states dollars,we who are busy going about are business of producing and earning the country forex will not scream and wail on the dailynews platform

truth - 25 January 2017

its been in that state for awhile.

Young Zimbo - 25 January 2017

so desperate are the british puppets that their puppet @diibulaanyika is even responding to his own posts on the the platform kkkkkkkkkk

truth - 25 January 2017

Silly man truth. You can circulate the useless bond notes as much as you want but when the US dollars run out what are you going to use for imports stupid.

Changamira - 25 January 2017

It wuld be stupid for Reserve bank not to mop out US dollars from the market and replace wth local currency,slowly.Mangudya is doing fine.Any governor will do that.Why do yu need to continue buying beer in US dollar ,when yu have local currency.?Its not clever at all.There must be a time when there wuld be no US dollar on market ,nothing bt bond.Thats the direction.Are there any shortages of commodities?No.So whats yo wory.

viola gwena - 25 January 2017

Kkkkk,truth, iI thot so.But point of correction ,the British are smarter not to be involved wth a rural cabbage economist.The British refused to dump their pound for euro.They prefer to use their currency.The British wuld rather exit Euro markets to keep their pound.But sme local skunks think its wise to buy amaghundwani using US currency.When a skunk fails to master a few economic sums the frustrations stink .miserably puking smelly stuf.

viola gwena - 25 January 2017

Last Year I had a few thousand Dollars and wanted to exchange them into Euro by use of a local Bank and they told me that I were only allowed to exchange up to 1000 Dollars daily in any other Currency although I walked in with the Dollars in my Hand. But than the same Bank tells me that they are lack of Dollars so how stupid is this? If you could explain to me what kind of treat to the Banking System in terms of Dollar Shortage I would have caused may be if I were been allowed to exchange all Dollars in within one day into Euro ??? And if Bond Notes cannot be exchanged outside the country than this is not a currency but toillet paper since people are also said to travel from time to time so should they buy Gold inside of Zimbabwe and externalise the Gold than or what?

Emperor - 26 January 2017

those who want to earn united states dollars must either become exporters or emigrate to the united states of america,in zimbabwe we will use our own currency be it bond or whatever,common sense dictates that it is near impossible for a country to use the currency of another country,due to the greenback zim has only managed to become a supermarket for other countries products whilst churches invade former factory flow,this cant continue

truth - 26 January 2017

The answer is simple.... establish a trustworthy and accountable government .

Andy Cader - 26 January 2017

WE WILL SEE NEBOND COIN

soames chitiga - 26 January 2017

we are simple replacing us foreign currency with our own. we need to see the results please understand

chabata - 26 January 2017

@Tete viola. puliiz , don't speak of amagundwana. You wet my taste buds! Mbeva ndizvo

Karumekanoruta - 26 January 2017

Parquet Tiles Sanding and Repairs CALL ON (04)852204

TFFLOORING - 27 January 2017

since the president is always globe trotting and takes with him huge sums of money(u s dollars ) to be precise, saka anorega nei kupera ma US dollars acho

jet li - 27 January 2017

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