Zim under threat of losing US$

Source: Zim under threat of losing US$ – The Standard May 1, 2016

Zimbabwe’s privilege of using the United States dollar as its major medium of exchange is under threat amid revelations the currency is being smuggled out of the country on a massive scale.

BY VICTORIA MTOMBA

This has raised fears that if the situation persists, the country could be forced to stop using the currency.

“It is clear the cash is being smuggled out of the country. Authorities are saying the crisis is caused by rising imports, but that does not add up because the country has been importing products for years without experiencing such shortages,” a source said.

“There are now fears that the country will go the Angola route where American banks stopped supplying dollars to the country last year over lax regulations which led to massive leakages of the currency.”

In his January monetary policy statement, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said the bank was putting in place stringent and prudent measures to plug illicit financial outflows, as it emerged that close to $2 billion was spirited out of the country last year by individuals and companies, sparking the liquidity crisis.

This comes as the country is battling a cash crisis that has seen banks putting a cap on withdrawals with depositors having to endure long queues at banks to access their money.

The dollar is the last “currency standing” in the multi-currency basket introduced in 2009. The basket had the South African rand, British pound, Euro and the Botswana pula.

Mangudya told Standardbusiness on Friday that the cash crisis had also been caused by an increase in the usage and demand for the United States dollar in Zimbabwe as the other commonly used currency, the South African rand fell out of favour because of its depreciation.

Mangudya also said the strength of the dollar encouraged hoarding and exportation of cash since it was viewed as a safe haven currency or an asset.

“In the case of Zimbabwe, the dollar has become more of an asset than a medium of exchange. Unfortunately, all other nationals throughout the world are in search for the same asset,” he said.

Mangudya said in areas such as Bulawayo and the entire southern region, transactions used to be conducted in rand but that had all changed as everybody switched to dollars.

“We now use dollars in Bulawayo. That part of the country is where we find most of our small-scale miners who used to get paid in rands. They now no longer accept the rand and are receiving payments in dollars, putting pressure on the US dollar. The miners contribute 40% to gold output and their production is increasing. Last year we used to pay $3 million per week to artisanal miners but now the figure has doubled to $6 million per week,” he said.

Mangudya added: “The Southern region was using $50 million equivalent per month in rands but now with the strength of the US$ this has to be in dollar quantum.”
He said the other reason was that Zimbabwe had a negative trade balance, which meant that it had more imports than exports and, therefore, used more dollars than it earned.

COMMENTS

WORDPRESS: 6
  • comment-avatar
    Joe Cool 6 years ago

    How do you ‘smuggle’a US dollar out of the country? Does Zimbabwe have some control over the movement of another country’s currency? Why do you ‘smuggle’a US dollar out of the country? For what purpose?

    We keep on importing but we fail to export, so we are exporting US dollars to import what we fail to produce.

    Have I got it wrong? If so, enlighten me.

  • comment-avatar
    njabulo jb 6 years ago

    Really this country is going down forever,are we waiting for the Lord to come down to tell us that we are in the wrong side of the fence.even the dead are worried about the situation in this so called Zimbabwe.

  • comment-avatar
    Clive Sutherland 6 years ago

    If the outflow of US$ is restricted, the fall out from this will naturally be a restriction on “inflow” of US$
    If a business\individual cannot take their earned US$ out the Country why would they risk bringing in US$?

  • comment-avatar
    Michael 6 years ago

    This is going to get very funny and nothing concrete will be done since the outflow is largely due to ZANU-PF bigwigs who are the chief exporters of dollars in their loot of national resources. The greatest thief of all is the President of the country. Every foreign trip means millions of dollars being exported to hide in their foreign bank accounts.

  • comment-avatar
    IAN SMITH 6 years ago

    Bob you continue to insult the settlers then go right on to use the settler’s currency $US.
    The settlers will soon take away their currency just wait and see then again they will take it right out of your bank in Singapore, you have no place to hide it in any bank ha!ha!ha! Panama is no longer an option Grand Cayman’s next. People using $US should pay US taxes ha!ha! ha! that would be a trick feel the squeeze/back lash.

    So we call it the white/ settler’s $US, just like we call the fair skinned citizen farmers “white farmers/ settlers”
    Of-course the $US has good valve excellent for shopping in Singapore also sort after by all living humans on the planet.
    Bob Why not use the Korean ” Won” best way out as your comrades who trained your 5th brigandage see how that works???

  • comment-avatar
    MikeH 6 years ago

    It isto be hoped that the end days are nigh for mr mugabe. With no US Dollars to pilfer he, and many others, won’t want to hang around. Now that would be a result !!!