Cash crisis symptom of broken Zim economy: Mangudya

Source: Cash crisis symptom of broken Zim economy: Mangudya – DailyNews Live

John Kachembere  13 July 2017

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.