Zim govt must address fundamentals first

HARARE - The Barclays Bank of Zimbabwe managing director — very qualified to comment on economic and monetary matters — warned that Reserve Bank of Zimbabwe governor John Mangudya’s plans to inject more bond notes into circulation will not help reduce the crippling cash crisis, which has caused horror for the transacting public.

“I think the reality of it is that if we don’t address the fundamental problems in the economy, the new bond notes will just disappear to where the other $200 million went,” George Guvamatanga told delegates at a mobile money and digital conference in the capital a fortnight ago.

“Even if we have $1 billion in United States dollars and $1 billion in bond notes, they will still continue to disappear if we don’t address the economic fundamentals and people’s rent-seeking behaviour,” he said.

Guvamatanga said the bond notes are “foreign currency” due to their artificial value which is equitable to the greenback and people in neighbouring countries were using them as a store of value.

“Until such a time when we can export more and have the correct pricing or valuation of money, we will continue to have cash crisis,” he added.

That was rare candid talk from the banker, advice that authorities often don’t get from the aloof Zimbabwean business community.

His comments came on the back of Mangudya announcing, at the dismay and disappointment of long-suffering Zimbabweans who yearn to lead normal lives, that the central bank was moving to introduce more bond notes into the cash-starved economy.

The move has largely been viewed as a desperate attempt by the monetary authorities to arrest the cash crisis, which the initial $200 million batch of the bond notes — a unique surrogate currency backed by the green back — failed to curb.

Instead, following the bond notes introduction, the cash crisis deepened, with the few US dollars in circulation disappearing; a development which demanded a practical comprehensive approach.

Hence Guvamatanga’s argument that we need to address the fundamentals first.

The cash crisis is a tip of an iceberg of bigger deep-rooted economic problems faced by Zimbabwe and introducing bond notes, which Mangudya cannot continue doing, is just a stopgap measure that does not address the underlying cause.

Zimbabwe’s problems require broad, comprehensive and well-thought through long-term solutions.

The country is failing to shake off the “risky investment destination” tag.

It is failing to regain investor confidence.

The politics is equally bad, with the ruling party embroiled in endless and unprogressive factional fights.

At the same time, the opposition alliance, which many have pinned their hopes on, seems to be lurching from one crisis to another.

On the back of all this, the manufacturing industries are collapsing, with unemployment reaching unprecedented levels.

The financial sector is, on the other hand, failing to regain depositor’s confidence following the 2006-9 disasters.

And all these problems are not happening in isolation. They are certainly related.

Going by Guvamatanga’s advice, to curb the cash crisis, and many other problems bedevilling Zimbabwe, authorities need to address the fundamentals first.

Apart from getting the politics right, which is crucial in saving Zimbabwe’s dying economy from the abyss, those in power need to probe and understand how the crisis came about.

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