Dying Zim economy a ‘ticking bomb’

Source: Dying Zim economy a ‘ticking bomb’ – DailyNews Live

Bridget Mananavire      30 April 2017

HARARE – Long-suffering Zimbabweans have laid into President Robert
Mugabe’s misfiring government, warning that the country’s dying economy,
worsening cash shortages and rising poverty levels are “a ticking time
bomb” that now requires emergency measures.

This comes as the country’s usually restrained church leaders have also
waded into the cash crisis saga, saying that this is indicative of “a
complete failure” by the broke Zanu PF government to deliver on any of its
2013 electoral promises.

It also comes as there are growing fears that the Zimbabwe’s dying economy
is hurtling towards the debilitating lows of 2008, as bond notes – which
were meant to mitigate the country’s cash crunch – are themselves fast
disappearing from the market.

United States dollars long vanished from the formal market – with the
coveted greenbacks now only easily available in the thriving black market.

On its part, the Reserve Bank of Zimbabwe (RBZ) recently ruled out
injecting more bond notes into the economy, arguing that Zimbabwe’s
worsening cash crisis would only improve when the country’s production and
export performances improved.

This has seen overstretched banks resorting to giving desperate depositors
bags of inconvenient bond coins when they withdraw their money.

The leader of radical pressure group Tajamuka/Sesijikile, Promise
Mkwananzi, was among those who warned authorities in an interview with the
Daily News on Sunday yesterday that the country’s worsening economic woes
and cash shortages were “a ticking time bomb”.

“We said it last year that the useless bond notes were not the solution.
The current cash shortages are also evidence that President Mugabe and his
government have failed.

“The people are very angry about the state of the economy and the fact
that they are not getting their money. They are also angry at politicians
who are externalising money.

“The only solution available to Zimbabweans now is a change of government,
as the president no longer has the ability to lead this nation.

“The banks must also make sure that people are served and that they get
their money. Where indeed is the people’s money?” Mkwananzi said.

The RBZ introduced bond notes at the end of last year to help ease the
country’s severe cash shortages, but so far this has failed to satisfy the
market’s cash needs.

The acute cash shortages have seen banks limiting the amount of money both
individuals and companies can withdraw, sometimes to as low as $20.

So bad has the situation become that desperate customers are also now
having to make do with sacks of coins when they withdraw their money.

“We don’t have an economy to talk about. When these guys came up with bond
notes they said it was to ease the cash shortages, but now the situation
is even worse.

“The United States dollar has completely disappeared and even bond notes
are also now disappearing and people are being given kilogrammes and
kilogrammes of coins.

“By the time we get to the end of the year I can only imagine that the
situation will have reached dire levels.

“I hope the people are watching and that they will vote wisely next year,”
forthright Zimbabwe Divine Destiny pastor, Ancelimo Magaya, told the Daily
News on Sunday.

Outspoken National Vendors Union of Zimbabwe (Navuz) chairperson, Sten
Zvorwadza, said the government should, in addition to apologising for its
misrule, also consult the people on what to do to solve the country’s
worsening economic crisis.

“The people are not happy. In fact they are very angry. They entered into
contracts with banks to get their money on demand, but are failing to do
so … and there has not been a proper explanation on where their money
went.

“We need the government to consult the people on all this so that it comes
up with lasting solutions,” Zvorwadza said.

“I don’t know how we will get to December if this continues. I can tell
you that most vendors are now finding it difficult to trade, as they have
not been able to access their money in the past few weeks.

“None of them have been able to get more them $50 from the banks.  The
bond notes were the biggest mistake this government ever made … and
without confidence, the economy will continue to crumble,” he added.

Last week economists also warned that the country was headed for a major
crisis and that the disappearing bond notes were indicative of an economy
“in deep distress”.

“The fact that it is so difficult to get money out of banks also makes
people reluctant to put their money into their banks.

“With 10 million Zimbabweans each carrying a few bond notes in their
pockets, wallets or handbags, 10 million times that number can easily add
up the total amount of bond notes in issue,” veteran economist, John
Robertson, told our sister paper, the Daily News.

Piers Pigou, senior consultant at the International Crisis Group, said
bond notes were now also circulating in the informal sector.

“There is no market for bond notes outside Zimbabwe, so I can only imagine
the notes are moving into and circulating within the informal economy of
Zimbabwe.

“This would not be unusual given the scale of the informal economy,” Pigou
said – referring to a sector that has been burgeoning, with nearly six
million micro, small and medium enterprises absorbing the bulk of the
country’s retrenched workers and unemployed graduates.

“It never seemed likely that bond notes could ever provide anything other
than temporary relief. But like US dollars, they will seep out of the
formal economy … just not as rapidly as the Benjamins,” he added.

Last week the International Monetary Fund (IMF) also noted that bond notes
had failed to solve the country’s deepening fiscal crisis, further calling
for comprehensive reforms.

“Zimbabwe is in a very, very difficult situation, as you know. There is a
limited amount of foreign exchange inflows coming in and no monetary
policy tool.

“So, it’s very important to have a more comprehensive policy package which
also addresses a lot of the fiscal challenges that the country faces,” IMF
director for the African Department, Abebe Aemro Selassie, said.

Zimbabwe is deep in the throes of a debilitating economic crisis which has
led to horrendous company closures and the consequent loss of hundreds of
thousands of jobs.

At the same time, economists have said that poverty levels in the country
are skyrocketing, with average incomes now at their lowest levels in more
than 60 years – with more than 76 percent of the country’s families now
having to make do with pitiful incomes that are well below the poverty
datum line.

This comes as Zimbabwe has now been officially ranked as the poorest
country in Africa.

According to the Africa 2016 Wealth Report, Zimbabwe has been ranked as
the country with the poorest people on the continent, with average wealth
of $200 per person.

In the report, AfrAsia – a Mauritius-domiciled financial institution which
once operated in Zimbabwe after acquiring the now-defunct Kingdom
Financial Holdings Limited – noted that back in 2000, Zimbabwe was one of
the wealthiest countries in sub-Saharan Africa on a wealth per capita
basis.

It listed Mauritius as the country with the wealthiest people, with an
average wealth of $25 700 per person.

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