Cash crisis symptom of broken Zim economy: Mangudya

HARARE - Reserve Bank of Zimbabwe (RBZ) governor John Mangudya yesterday said the current cash crisis is a symptom of a broken economy.

“People are asking the wrong questions, it’s not about the currency but about the economy which is not performing,” he said.

This comes as government is struggling with a cash crunch that has forced people to spend hours at banks queuing for money.

Mangudya, who was addressing a media and business stakeholders symposium at the University of Zimbabwe, said there was need to expand and diversify the economy to help ease the current cash crunch.

“Bank queues are symptoms of a bigger problem. We are not creating enough foreign currency for domestic use. We are the only country in the world that is using other people’s currency but we have no access to foreign currency due to international isolation and sanctions,” he said.  

Zimbabwe ditched its own hyperinflation-wrecked Zim dollar in 2009 in favour of the US dollar, but a widening trade deficit, shortage of foreign investment and a sharp decline in remittances by Zimbabweans abroad have helped to fuel foreign currency shortages.

Government needs at least $10 billion in foreign reconstruction aid, but western nations are reluctant to release aid without political and economic reforms, and have maintained sanctions protesting rights abuses and electoral fraud by President Robert Mugabe and his administration.

Zimbabwe’s economy remains fragile with a “precarious” level of public debt during the year to March rising to over $11 billion.

Mangudya said the central bank was working on a number of initiatives to stimulate the economy such as promoting a cash-lite society, promoting export of goods and services and encouraging self-discipline and adherence to good corporate governance and good business practice.

“We are also promoting productivity across all the sectors of the economy as well as promoting financial inclusion. As government, we are implementing friendly business environment, pushing for fiscal consolidation and the re-organisation of State-owned enterprises,” he added.

The RBZ governor said indiscipline, illicit financial inflows and low productive levels were significantly working against economic revival.

“We now have people who want to make money by selling money instead of working hard in the fields to produce crops we can sell. People don’t want to work hard anymore,” he said.

Mangudya noted that the country earned over $2,8 billion in the six months to June this year, but the money did not circulate on the market.

“Only $800 million was allocated through the central bank while $2 billion was allocated through the banks, but it appears the 30 percent which we are managing has more impact than the 70 percent being managed by banks,” he said. 

University of Zimbabwe economics lecturer Pheneas Kadenge concurred with Mangudya and said the country was facing a production crisis and not a cash crisis.

Comments (2)

Why not just toe the line and get international assistance. Our problem is not the economy, our problem is political. Do the right thing so that we move forward.

Musindo - 14 July 2017

No level of international aid will help us. This government is too extravagant and too dishonest to ever manage the economy efficiently.

citizen - 26 September 2017

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