Zim has only $300mln in circulation

Source: Zim has only $300mln in circulation – DailyNews Live

The Source      29 January 2017

HARARE – Zimbabwe has $304 million hard cash in circulation including $73
million in bond notes as of January 2017, about a third of optimum demand,
reflecting a worsening liquidity crisis, an economist said.

Ashok Chakravarti, who also advises the Office of the President and
Cabinet on improving the ease of doing business, told a Confederation of
Zimbabwe Industries (CZI) symposium on Thursday that hard cash in
circulation inclusive of bond notes and US dollars was five percent of
total bank deposits which has contributed to the country’s liquidity
crisis.

“If you look at comparative studies from other economies cash to deposit
ratio should be between 10 (percent) to 12 percent. If an economy has got
less than 12 percent, it faces liquidity crisis…..We need $900 million
in cash to have adequate liquidity,” said Chakravarti.

Hard cash circulation in the country has dropped by 53 percent from $642
million in 2013 to $304 million currently. However, bank deposits have
increased from $4,728 billion in 2013 to $6,2 billion in 2016.

At the onset of the multicurrency system in February 2009, total deposits
in the banking system were $1,66 billion. Cash to deposit ratio has
decreased from 35 percent in 2009 to five percent in January 2017.

The amount of cash held in Nostro accounts declined by 61,6 percent from
$424 million in 2009 to $163 million as at November 2016.

“When liquidity challenges first surfaced in 2014, the RBZ reduced cash
holdings in Nostro accounts from 30 percent to 5 percent of total deposits
to improve the availability of cash in the economy. This decision simply
led to externalisation of dollar cash, exacerbating the liquidity crisis,”
said Chakravati.

To resolve the liquidity crisis in the country, Chakravarti recommended
that the government should reduce wage bill, stop reissuing of Treasury
Bills and borrowing from the private sector, repeal the indigenisation
policy and adopt the South African Rand.

The business community has voiced its distrust of government methods of
dealing with the acute cash shortage of bank notes and urged an adoption
of the Rand, a suggestion the State turned down.

Chakravati has previously suggested a three percent import levy across the
board which he said could raise $2 billion (annually) to incentivise
exporters in real currency instead of the bond note incentive.

COMMENTS

WORDPRESS: 3
  • comment-avatar
    Morty Smith 5 years ago

    This guy cannot even do arithmetic. 3% on imports would not raise 2 bill it would be about 120 mil. Big difference. I guess that is why ZANU loves him. They can’t do arithmetic either.

  • comment-avatar
    Diasporan 5 years ago

    Soon there will be no US dollars available, just useless bond notes, Mugabe family & his ZANU PF thieves will make sure of that. Zim is heading for total meltdown, I bet Mugabe family have already started flying their stuff out to Equatorial Guinea for when there’s nothing left to steal.

  • comment-avatar

    Oh dear you near the edge arn’t you! So if I read it right there is shortfall twice what is in circulation and 25% of that is in the form of I.O.U’s. therefore you actually have only 231m$US
    I read this news as ‘justification’ for the printing machine to run. The ideas put forward will not produce.
    The problem is……. the moment you print more, you are back to where you where, because the money has to be ‘REAL’ to make a difference.
    Robert. “Yes Dear”
    “Your know we used to have something wonderful between us”
    ” Yes Dear, I know what you mean – You spent it all”
    ” More Fruit Cake”
    ” Oh Lovely”
    [Botty burp]