Government fuels liquidity crisis

via Govt fuels liquidity crisis April 11, 2014 Zimbabwe Independent

Government is fuelling the country’s already critical liquidity situation as it emerged this week that the state accounted for 60% of Zimbabwe’s US$7 billion imports.

Zimbabwe has negative balance of payments position as imports exceed exports with a current account deficit of over US$3 billion in 2013.

Zimbabwe Revenue Authority (Zimra) commissioner general Gershem Pasi told a Parliamentary Portfolio Committee on Foreign Affairs this week government was the country’s largest importer, bringing in goods worth over US$4 billion last year.

Pasi’s disclosures came amid accusations Zimra was failing to meet its mandate — to collect duty — at a time imports exceeded exports.

“It is said there are leakages of US$7 billion worth of revenue from imports at ports of entry, but US$4,1 billion worth of those are government imports which do not pay duty, while others are imports from bilateral agreements like Comesa. Last year, we were at 29% of GDP (gross domestic product) in revenue collection and were amongst the highest in the world,” he said.

Government has been criticised in the past for not living within its means and importing luxurious items such as top-of-the-range vehicles for cabinet ministers, senior civil servants and MPs.

Sources of liquidity such as exports, lines of credit, foreign direct investment (FDI) and diaspora flows (unrequited transfers) are not yielding much.
Growth in exports of goods and services has remained low, averaging less than 1% on a monthly basis over the past 12 months to September 2013, while imports have accelerated as domestic industry production decline.

Expansion in imports against static exports means the current account is widening and the economy is thus hemorrhaging liquidity. Lines of credit on the other hand are few and high-priced due to the risk premium attached to the current external debt and arrears.

This has also worsened Zimbabwe’s liquidity position.

Analysts say the US$4 billion spent on imports could have been invested in the productive sectors of the economy.

Others say Zimbabwe is neither saving enough to invest nor attracting sufficient FDI to re-equip.

While billions are being funnelled to various offshore destinations for imports by government, offshore loans to retool industry are hard to come by.

Locally produced products are uncompetitive in terms of price and quality given that industry is stuck with old and antiquated equipment and machinery. Their competitors elsewhere are using state-of-the-art technologies and are generally more competitive.

Pasi also said Zimbabweans were exporting cash.

“There has been an influx of imports and for as long as our economy is not performing, people will continue to import,” he said. “But we will be discussing the issue with the new RBZ governor (John Mangudya) because we are concerned about exports of cash since the current regulations allow a person to take US$10 000 cash per trip and there is no limit as to the number of trips one can take.”

Pasi said Zimra wants a monthly cap on the amount of money people are allowed to export.

He said the months of January to March, Zimra managed to exceed its quarterly revenue collection targets by 2%.

 

COMMENTS

WORDPRESS: 6
  • comment-avatar

    Pasi you are crazy you seem to be clueless of how to work out your Economics to solve the problems. Try what you have said and I can assure you one thing. Expect the worse after such an attempt you can not restrict people on their hard earned cash.

  • comment-avatar
    John Thomas 7 years ago

    Government imports equal to the entire budget? This 4 billion is a very fishy number. The figures are likely cooked as with every aspect of this guy.

    His wanting to limit what people can do with their own money is also very characteristic.

    I am sure Mr Pasi consumes more than his fair share of imports and exprts more than his fair share of money. Can he clarify how many overseas bank accounts he has? What exactly is his salary?

  • comment-avatar
    munzwa 7 years ago

    Make up your mind Pasi, did you collect more than your forecast or not, if you collected more than what is the problem?, cut back on expenditure.Many big companies are closing down is this not the perfect opportunity for the “indigenous” group to climb in and resuscitate without trying to muscle into existing companies??????

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    gizara 7 years ago

    typical of a malfunctioning economy where money cannot maintain its value or there is risk of losing your savings. the rational person will move their money elsewhere.

    why are trying to treat the symptoms and not the disease?

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    Zim Patriot 7 years ago

    Free up the economy, bring in investors,secure property rights, rule of law, respect and compassion for fellow Zimbabweans and you shall see how amazing this country can become…..We have been blessed by the Lord with abundant natural resources, our people are intelligent and well educated, our labour are hard working and diligent, we have beautiful tourist destinations, abundant water/rains/dams for agriculture there are just NO excuses about why our country is struggling…solutions are so simple. Our direct neighbours economies are booming, South Africa, Botwana, Zambia and Mocambique…No excuses manage the economy and country responsibly, that is the solution, enough opulence and greed for only a few…..allow free economy without restrictions and confidence will come back

    • comment-avatar
      revai 7 years ago

      Its not that difficult ..taura hako zim patriot….just common sense …whats wrong with these goons