Anxiety mounts as MPS nears

Source: Anxiety mounts as MPS nears – The Zimbabwe Independent

FIDELITY MHLANGA

ECONOMIC experts have said the Reserve Bank of Zimbabwe (RBZ) should address deteriorating shortages of smaller denominations of local and foreign currencies to help retailers pull through a vexing change crisis.

They spoke as the central bank is due to issue its Monetary Policy Statement (MPS) soon.

To tackle the liquidity crisis, retailers have had to continue issuing tokens as change.

Fast food chains operated by the Zimbabwe Stock Exchange listed Simbisa Brands and Spar supermarkets are among retailers that have improvised after forex notes disappeared on the official market.

Denominations that have been in short supply include the US$1, US$2 and US$5 – the same range that gave the market headaches during the first phase of dollarisation in 2009.

Zimbabwe adopted the multicurrency system in 2009.

But in 2019, the government ended the system, directing that only the Zimbabwe dollar would be used for local transactions.

Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu this week said retailers were desperate to push volumes under an extremely difficult climate.

But they were aware that without improvising, the change crisis would affect business.

“The issuance of coupons as change is a desperate but necessary intervention to alleviate the problem of change as shops do not have smaller United States dollar denominations,” he told businessdigest.

“The coupons are custom made to a particular brand of store and customers can exchange them for goods or cash when available, though rarely,” he noted.

The crisis is that the same smaller denominations that have disappeared are readily available on the parallel market.

A saving culture in Zimbabwe ended during a spat of bank failures in the mid-2000s.

Consumers keep both local and foreign currency cash in their homes and release them only when it is necessary.

Analysts hope that in the MPS, RBZ governor John Mangudya will announce high denomination notes to address the cash crunch.

But still, in a dollarising economy, the impact of such notes may be little, given that what consumers need now are US dollar notes.
Economist Victor Bhoroma agrees.

“History repeats itself,” he said this week.

“Zimbabwe entered such a phase in 2008/2009 when dollarisation started. It (the problem) will extend to commuter omnibus operators and other big retailers. The onus is on the government to import small denominations of $1 and below to help the transacting public to get change conveniently.

However it may be unrealistic now since the central bank is printing Zimbabwean dollar notes, which fill that gap,” Bhoroma noted.

“The government still needs to print money to buy gold, credit exporters and other projects. Adopting the US dollar fully closes all quantitative easing loopholes in an economy where government consumption outweighs tax revenues. So the so-called failure, policy uncertainty or lack of clarity is very much intended.

There is a formula in it, “Bhoroma said.

Another economist, Takudzwa Chisango said: “Some businesses are now exploiting customers on the pretence of change shortages.
Issuance of tokens, which are only usable to the issuing business operators, is daylight robbery “.

Economist John Robertson said: “Tokens…expose the inadequacy of our local currency arrangements”.