Africa Moyo Business Reporter
GOVERNMENT says the cash challenges bedevilling the economy will be overcome in the near future but only if the country accesses significant lines of credit and ramps up exports.
Citizens — particularly businesspeople — have also been called upon to have confidence in the economy and the new administration, for the cash crunch to end. This comes as depositors — mainly pensioners who remain sceptical about embracing plastic money — continue to flood banking halls seeking withdrawals.
Apart from uncouth businesspeople who fail to bank money in contravention of the Reserve Bank of Zimbabwe (RBZ)’s Bank Use Promotion Act, Government says the boom in manufacturing sector capacity utilisation has also ramped up pressure on the demand for foreign currency. Government introduced Statutory Instrument 64 of 2016 on July 1, 2017 to protect local manufacturers from unfair competition brought by imports.
However, restriction of imports has caused a spike in demand for foreign currency to import raw materials, over 60 percent of which are obtained abroad. From April 2017 to date, the cooking oil sector has used $54 million to import raw materials.
Deputy Minister of Finance and Economic Planning Terence Mukupe last week said 60 percent to 70 percent of inputs used by industry are imported, piling the pressure on foreign currency demand.
“I can tell you that from April to date, we have expended close to $54 million in importing crude oil,” said Deputy Minister Mukupe.
Before the introduction of SI 64, South African companies were exporting cooking oil into Zimbabwe, a move that saw cash being siphoned out. Deputy Minister Mukupe said the growth of urban centres — which is good — to accommodate many residents, has imposed a further strain on the demand for foreign currency as municipalities now require more to import chemicals for water purification.
But he believes that boosting exports, and critically, accessing lines of credit from multilateral financial institutions such as the International Monetary Fund, World Bank and the African Development Bank (AfDB), is key to permanently resolving the cash shortages.
“We have to increase our exports to plug that gap, but the appetite that industry has for foreign currency is not matching the increase in what we are exporting and the only thing that will address that is accessing lines of credit. That is the only way,” he said.
Government has, since November 24 when President Emmerson Mnangagwa was sworn in, been seeking to re-engage the international community following years of isolation. Last Wednesday, World Bank officials met Ministry of Finance officials as part of the re-engagement process.
Similarly, Ivory Coast-based AfDB has already engaged Government with a view to extending lines of credit, while the Cairo-based African Import-Export Bank (Afreximbank) has pledged to inject a mammoth US$1,5 billion into the economy. Deputy Minister Mukupe said the AfDB has “given us a fantastic story” regards their expectations from the country.
“I am actually happy that in terms of the things that they have put on the table for us, these things are not insurmountable. In terms of confidence building, we are actually seeing the light, and we are seeing where we are going. It’s not for me to make pronouncements, but as we progress, the President (Mnangagwa) together with my boss — the Minister of Finance (Patrick Chinamasa) are going to make pronouncements. And I can tell you that times are exciting,” he said without elaborating.
However, he said it is imperative for citizens to have confidence in the economy, adding that in a normal economy, the US$1 billion stock of money circulating in the country — relative to deposits — was supposed to be enough to ensure depositors withdrew their money on demand.
Dr Mangudya accused citizens and businesspeople of lacking “discipline”, resulting in some of them failing banks, and others selling cash at a premium to the manufacturing sector, causing prices of goods to sky rocket.
Deputy Minister Mukupe said if we fix the confidence issue and citizens become positive that Government will turnaround the economy, money will become available.
“I am sure you have also seen that US dollars are resurfacing in banks, that is a sign that the confidence is coming back,” he said.
Confidence is creeping back following the coming in of the new Government and pronouncement of investor friendly laws.