Liquidity crunch seen forcing Zim$ return

via Liquidity crunch seen forcing Zim$ return 09/11/2013  by The Source NewZimbabwe

THE government is likely to adopt a dual currency system that could bring back the Zim dollar alongside the United States currency if the government fails to resolve the liquidity crisis and to convince multilateral institutions to lend money, an analyst has said.

Zimbabwe ditched its local currency after being rendered worthless by hyper-inflation which topped 500 billion percent and adopted the multi-currency system dominated by the US dollar in February 2009.

It has enjoyed an economic growth rate averaging seven percent since then and inflation fell to 0.86 percent in September but GDP growth is seen slowing to three percent this year after President Robert Mugabe’s Zanu PF party claimed a decisive victory in the July 31 elections disputed by the opposition.

Finance minister Patrick Chinamasa has said the regime will continue indefinitely but Tony Hawkins, the head of the University of Zimbabwe’s Graduate School of Management said the tightening liquidity in the economy could force a rethink and that there was always the risk that politicians would seek a “superficially attractive” way out to finance campaign promises.

“I suspect – perhaps fear – that the government will opt for some dual currency option,” said Hawkins in a presentation of the 2014 economic outlook on Wednesday.

An International Monetary Fund (IMF) delegation is in the country to assess progress made in implementing the Staff Monitored Programme (SMP), which if successful, could help it clear $10 billion in external debts and give it access to new credit from international lenders although that is unlikely to happen soon.

“Given the IMF forecast of a sluggish global economy and the third successive year (in 2014) of decline in non-fuel commodity prices, Zimbabwe can expect little in terms of an external stimulus to growth,” he said.

“This means growth must be domestically-driven in an economy where the government budget is under enormous pressure and there is no scope for a fiscal stimulus.”

Information minister Jonathan Moyo recently said the Zanu PF party election manifesto left the door open for the return of the local currency to circulate along with the multiple-currency, although not in the foreseeable future.

The government has adopted a new economic blue print, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) which projects a GDP growth of 6.1 percent in 2014 and 9.9 percent by 2018 but Hawkins said the plan failed to explain where the investment would come from.

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President Mugabe told a party meeting on Friday that government expects more money from diamond sales after the European Union removed sanctions on the state-owned Zimbabwe Mining Development Corporation.

 

COMMENTS

WORDPRESS: 29
  • comment-avatar

    For security reasons,its not proper for any government to expose its plans to the public for they can be wrongly labelled by people with no economics back ground.let the people with the mandate to execute the economic tone do so.Yes,we want results but this is too early to conclude failure.lets be positive about our country and ourselves.lets build our country ourselves not foreigners.We Zimbabweans,how much can we do for Zimbabwe,foreigners are there to exploit us whilist feeding their countries.So how much can you do for your country is the equation here and probably the solution.

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      Kevin Watson 8 years ago

      Its a pity you did not understand what the article was saying, or why the ZANU PF government of between 2002 and 2008 caused hyperinflation. There were two reasons, one was to finance the unrealistic promises of the Government to the so called War veterans whilst they destroyed the econonmy (thats right a 40% decline in GDP, and the other was the manner in which it was done which allowed the ZANU PF faithful to enrich themselves by having access to foreign currency which they then sold to the private sector at usurous rates. Any person who thinks that the people who did this should be allowed to do this again is beyond stupid.

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        BossMyass 8 years ago

        Just to add that they of course do not consider this place as their country and the don’t give a s…… for anyone else. For them is all business.

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    Tjingababili 8 years ago

    THEN DONT LET DR ZEROOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO GO, WE NEED HIM AT THE PRINTING PRESS!

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    vukani madoda 8 years ago

    Dr ZOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOORO is going nowhere;mark my words.There would be no other job to offer him but at the Reserve Bank-even when the cauffers are empty there,he will have a job reserved for him:you tell me who in their sane mind would even dream of employing him after what he did to the economy

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    chimusoro 8 years ago

    Yes only a matter of a short time before this happens. Don’t be fooled by talk of 5 years time! If word got out all capital would fly out in the blink of an eye-be warned!

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    Janto 8 years ago

    The Zim dollar return is the only true long term solution to resolve the liquidity crisis. The only reason why the US dollar is being used is because of the uncontrolled way the Zim dollar was getting printed by the RBZ. If that can be controlled then the Zim dollar is the best way to go as it will solve the cash crisis as long as the money in circulation is controlled and based on some other tangible value such as gold.

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    Peter tosh 8 years ago

    Khulamani your thinking and reasoning is biased. Where have you seen a country that is standing alone without help from other countries? If your laws are strong and followed there is no country which can exploit your resources without you gaining something. The problem is that u were mentally colonised that u even fail to be rational.

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    Mendy 8 years ago

    Magiya you ask what we can do for our country? I ask those that have the power and the wealth (Mugube)what can you do? Why have you and your cabinet members not shared your blessings with those who have nothing. Have you shared your homes, your food, your clothes with those who have nothing. Do you not have a speck of compassion in your heart for your fellow Zimbabweans. We are the same ones who help feed you, cloth you, and shelter you in those times of conflict with Rhodesia. Why have you forsaken us?

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    maisokwazo 8 years ago

    It baffles the mind to think that a once shining bacon of Africa is now a laughing stock. More than 4 million running away from a country with only 13 million people. What a shame. Japan has more than 20 million people smaller than Zimbabwe but is one of the leading economies of he world.

    Tell me do these hogs have a conscience at all. They fully know it was the same ZIMKWACHA that was a world ridicule yet they talk of bringing it back. How naïve. Does the word “failure” have any place in their vocabulary I wonder?

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      Wrongsir 8 years ago

      Correction: Japan has more than 120 million. It is 62nd in the world in total land area whilst Zimbabwe has 13 million and is 60th in the world in land area.

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    Kalusha 8 years ago

    To early to clamour for return to $zim as soon as that is done chaos would move in,zimbos are greed they will start hiding the USA dollar.looting by our gunners was caused by value less currency then without industry to support it won’t work

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    Kalusha 8 years ago

    It’s better to earn $400 than 100 trillion zim dollar,nowadays we are extending our homes amd driving ex japans with the $400 those who want zim $ planning a burial for zim,i believe they were not around during trillion days

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    Jenandebvu 8 years ago

    @ Kulmani, a couple of things, Tony Hawkins is the Head of Graduate School, not undergraduate, he is a Professor reponsible for MBA and Phd. He has a Phd in Economics. The reason why proposed budgets a debated and scrutunised is to ensure some degree of reasonableness. China-masses understand and treasures what Prof Hawkins is saying. The fact that he presents it as an opinion and objective is a show of his ability to forecast future economic treads. In 2006-2007 Prof Hawkins advised Mr Gono to cease the printing of money as it was going to floor the economy. Lastly, if you ask Prof Hawkin too assume the role of Min of Financee or be RBZ government he will refuse, becoz he will not be allowed to implement the policies needed to turn around the economy independently. I respect the man, he was my Economic lecturer at MBA in 2007. I used to be critical of his analysis but 90% turned correct. Call a spade a spade

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    all HIV infected brains are the cause. Are people aware that 70% of HIV infected people are also infected in the brain with consequent crazy behavior. And by the way more than half of the ZANOIDS are infected, charles ndlovu, kasukawere etc. Don’t believe me research it. Are prop,e aware that in the late 1980’s a North strategic Alliance report said that HIV would cause major geopolitical adverse effects simply due to the infection of the brain by HIV. That report has come home to roost in the ZANOID clan. Go figure all this talk talk talk is going to get us nowhere. Its time for ousting this filth amongst us.

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    Mr Mixed Race 8 years ago

    Well said brother or sister[Jenandebvu],these people with little knowledge suggest unsubstantiated solutions to justify their masters’ mistakes because any meaningful change towards getting rid of corruption it threatens their survival.We can only turn around this economy if we deal with corruption ruthlessly and have all these looters thrown into our jails regardless of their positions in parliament.I am sure -THE ALMIGHTY HAS HEARD OUR PRAYERS,WE HAVE SUFFERED ENOUGH IN OUR RICH COUNTRY-WHY?

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    Pastor 8 years ago

    Passages such as those in Exodus which state God “visits the iniquity” of the fathers on the children to the third or fourth generation is referring to the consequences of the fathers’ sins. Sin (iniquity) not only hurts sinners, but can also hurt those around them; especially family, and not just confined to the generation at hand. The effects of sin can be lasting. Few think about this when they sin, so God’s warning is in good order.

    It’s not like if your father murdered someone, God then says you’re a murderer, too. It’s more like your father’s act results in you grow up being teased, harassed, and developing an inferiority complex, and God points to the situation to say, “Here’s yet more reasons why I don’t want any of you murdering each other.” He’s not jumping the guilt from one person to the next, he’s just allowing the effects. These effects can be both bad and multi-generational, but that is all part of why we should not sin in the first place. We’re all in this together.

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    Hisexcellency 8 years ago

    After the authorities abolished the worthless Zimbabwe dollar and adopted a wide range of currencies including the US dollar, foreign investments slowly began to trick in. China remained Zimbabwe’s undisputed largest investor. As Zimbabwe continues to plunge further into uncertainty and self-created economic crisis, largely as a result of poor policies, one wonders if there is a solution in sight to all this madness.With the country’s economic indicators painting a gloomy picture, government seems more determined to worsen an already messy situation as opposed to coming up with the correct economic remedies that could take us forward. We now live in a competitive world and have to scout. Investors invest in countries that offer them the best conditions and you have to meet and explain yourself. There is need to attract investment into the manufacturing sector, we cannot remain a supermarket for South Africa. With investor sentiments about the local economy’s attractiveness at their lowest because of increased political and economic discourse, the country’s poor showing on various global rankings has not helped its cause either.According to the latest World Bank (WB) Doing Business Report, Zimbabwe continued with its poor showing, ranked 172 out of 185 economies, despite an improvement in the country’s economy post–dollarisation and reduction in the process of registering a company from 141 days to five days by the Zimbabwe Investment Centre. Any foreign investor should still be prepared to accept that he or she will have to part with a 51 percent stake to locals in line with the policy, making it difficult for one to put in their money,Indigenization actually requires cash outlay first because money has to be invested first before it can be made; expect no cash windfalls in the short to medium term from this process.

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    guy Gusu 8 years ago

    Things fall apart. The reintroduction of the ZimKwacha will be the final nail in the country’s economy coffin. How can sane people reintroduce a currency they themselves would not like to use let alone see in their wallets? Obviously to cheat and hoodwink people as always.

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      bam bam 8 years ago

      the zimbabwe kwacha no doubt will be a big money spinner for the zanuoids much the same as just printing trillions of zim dollars was before, tell me what fool in his rite mind is going to exchange valuable USA dollars for the rubbish new zim kwacha which is sure to devalue very quickly my friends. nothing has changed in the economy from 1998 till 2003 to 2013 all the signs of a collapsing economy are still there just waiting to happen again the only thing stopping total collapse is the good old USA$

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    Bringing back the Zim-dollr doesn’t work. Why? Because our own currency demands fiscal discipline, prudence and zero tolerance on corruption. It’s pointless when the sharks steals the money to sell it on black market. Our own currency will never work for as long as corruption exists at its rabid level in Zim. Above all, our currency cans only have value when there is a legitimate political entity in control. Having gold or silver to back it up is easy but political legitimacy is more critical. Since we have little choice to avoid chocking, what if we use the mandarin currency of China. We can ask our Chinese brothers to loan us 20 billion dollars worth of Chinese Yuan at 2% interest and we allow it to operate alongside the dollar. This can be the trick; after all the Chinese have loads of it and it doesn’t fluctuate stupidly in value because they are disciplined and they respect their currency. China chops off heads of corrupt leaders. If it were China tingadai tine makuva akawanda kwazvo following the zim dollar’s collapse but for the good of the country. But ultimately zvaibatsira kusafa nesuffering kwe even more people due to lack of medicines, starvation, hunger lack of education, business closures etc. But do we have the leadership to think of and implement all these alternatives?

  • comment-avatar
    guy Gusu 8 years ago

    Tatitadii. Muromo hauzarirwi nerwizi. Chiitai tione imi madofo nembava dzeZANU(PF). ZANU (PF) chese chayabata chasakara – zvikoro; macolleges/universities zvazara nepfambi nepamusana pehuori hweZANU(PF);migwagwa inoita matsime kanakwanaya; zvipatara zvave nzvimbo yekutapudzirana zvirwere panzvimbo pekurapiwa (zvavo vanoenda kuMalasia kunorapwa); mafekitori arikuvarwa siku nesikati; National Railways yave muintensive care unit; zvichiramba zvakadaro. Zvakadaro tonyeperwa kuti masanctions. KIKIKIKIKI!

  • comment-avatar
    shon corner 8 years ago

    handisi kutombodaba zvezim dollar

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    MANY AMONG US HAVE HEADS DEEP IN THE SAND;THESE ARE THE SONS OF THE SOIL WHO BELIEVE UNRESTRAINED OPTIMISM IN THE FACE OF UNPLEASANT REALITY WILL DO THE TRICK.THUS WE HAVE AN IDIOT CALLED MAGIYA WAFFLING ABOUT POSITIVE THINKING AND DOING SO MUCH FOR YOUR COUNTRY WHEN ALL ABOUT US IT IS EVIDENT THAT UNBRIDLED SELF ENRICHMENT IS THE OLDEST GAME IN TOWN AND ONLY FOOLS DREAM OF SELF SACRIFICE.

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    Pastor 8 years ago

    It’s hard not to get depressed when you pay attention to the world and how strangely and corrupt the people in it sometimes behave.You can’t sow an apple seed and expect to get an avocado tree. The consequences of your life are sown in what you do and how you behave.

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    gwabu 8 years ago

    Its a pity in Zimbabwe there are those who claim to be learned when their ideas are warped and far from reality.

    Its complete nonsense to talk of the return of the zimdollar. It was never banned by this government. The government only announced a situation that was then prevailing, the zimdollar just died a natural death. now you are talking of trying to resuscitate the dead. this is the reality that most learned people are refusing to accept and hightlight.
    The government introduced multicurrency without specifying which currency and the use of the usdollar, the rand and the pula was not dictated by government at all. the rand and the pular are not even in great circulation in the economy by comparison with the usdollar.

    RBZ announced the use of Chinese and other currencies as if its out of its policy with a multicurrency regime. it was meant to serve face and appear to have said something new. Chinese yen or Australian dollars or any other currency are covered under the multicurrency regime.

    the zimdollar will never return. this is what the learned people should strive to highlight. not fulling both the government and the people. this has also caused capital flight.

    • comment-avatar

      The simple truth is, at least in my own opinion, that the Zim dollar can come back without causing any hiccups to anyone. There are a few basic fundamentals to be acknowledged, though: – investigate and curb corruption immediately and visibly. Don’t steal the Zim dollar. Slush all corrupt salaries being discreetly siphoned by thugs in government, private sector and parastatals. The Dube salaries could be used to build clinics for the PSMAS members as an example. This would create massive employment. Harmonize salaries. Learn from others e.g. Chinese where a doctor earns $1000 but this money does more work than a British doctor who earns $4000 per month. Reduce cost of production by reducing electricity charges, phone charges and make custom regimes modest, while curbing rabid corruption there. Why should calling South Africa from UK cost 12p per min and 27p per min for Zimbabwe? Why should cost of electricity cost double in Zim compared to the average country. Invest in these key industries so that downstream industries can operate profitably and employ people. Remove or reduce duties on capital goods that will enable the country to produce products and hence employ people. Introduce Zim dollar gradually and allow it to work alongside other currencies. Give it appropriate exchange rate as a start. Increase employment by promoting apprenticeships, support workers in hospitals and schools. Introduce part time work. A lot of governments workers are simply roosting in offices- make them work half their current times, in other words change contracts or come up with targets. Legislate to encourage or force all those given land, say, 50ha+ to relinquish their posts and these be taken up by the unemployed; or they can do part time work. Make agriculture viable by privatizing GMB and offering commercial support to farmers. By keeping people with 50+ha of land in work you are locking away huge amount of money and potential production on farms thereby denying our country much needed income. Government should invest in every district- IT centres, sporting and cultural facilities, roads infrastructure etc., and this will create employment. Finally, improve the democratic space like we see in South Africa. This is the equation. It’s that simply.

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    gwabu 8 years ago

    a comment appears that am duplicating someone elses comment, its funny because this paper copies and paste other newspapers stories and we do read without making such a foolish comment.

    further it only hightlights that my comment is a duplicate without indicating what I should do next.