The country is grappling with low production and the prevailing cash crisis is just but a symptom of the problem, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said.
Source: Cash crisis sign of low productivity: Mangudya – NewsDay Zimbabwe June 17, 2016
BY TARISAI MANDIZHA
According to official statistics, Zimbabwe’s cumulative trade deficit since dollarisation was estimated at around $20 billion. The current account balance reflected a negative $1,2 billion in 2009 and has progressively worsened to a negative $3,1 billion in 2015.
Speaking at the IPMZ breakfast meeting in Harare yesterday on Bond Notes and the Current Cash Crisis — Implications to HR Practitioners, Mangudya said the country was consuming more than what it exports.
“Cash crisis is not the problem, but symptom of the problem, as Zimbabweans we spend more time on the symptoms and not the problems. The country has been in deficit since 2008 as imports are higher than exports and compounding effects of 2008 that’s what we are seeing today,” Mangudya said.
He said government was putting in place measures which reduce concentration of risk associated with heavy reliance on the United States dollar transactions that account for 95% of all transactions, up from just below 60% in 2010 by enforcing the use of multi-currency to spread the demand of cash to other currencies.
He said the policy measures introduced by RBZ were meant to promote the use of other currencies within the multi-currency basket in order to reduce the concentration risk on the use of a single currency US dollar to rand and euro, among others.
Mangudya said other measures include limiting cash withdrawals to $1 000, promoting the use of plastic money by all business and public utilities to reduce the demand for cash and importing dollars, rands and euros to address the cash crisis.
Mangudya said RBZ decided to fund the 5% export incentive through the bond notes “to mitigate or avoid externalisation, capital flight or looting of foreign exchange by unscrupulous businesses”.
He said the rationale for introducing the export bonus scheme was to tackle lack of export competitiveness due to high costs of production in Zimbabwe and the strong dollar, address limited circulation of the dollar within the economy as a result of hoarding and externalisation and sustain the foreign exchange position of the country’s nostros among others.