The Herald

Increased production key to ending cash crisis

People standing in a queue at a bank to get cash amid cash crisis or cash shortages in zimbabwe.

Panashe Chikonyora

The cash crisis that is currently bedevilling the country will not end by just injecting new notes and coins but will require increased effort into the productive sector, analysts have said.

Since November, the Reserve Bank of Zimbabwe has been injecting new notes and coins into the economy and has so far put in $150 million with the aim to reach $500 million by half year.

In total cash and coins in circulation – including bond notes – amounts to $1,1 billion which is 3,2 percent of Broad Money Supply in the economy against a target of 10 percent.

The plan is to reduce the rapid cash shortages that have led to the suffering of many, having to spend many hours in queues or pay premiums of up to 50 percent to illegal cash dealers.

Analysts however say the cash shortage challenges will persist for much longer.

Inflation surged, eroding the value of the 25 and 50 cent bond coins, which resulted in them being refused by most informal business operators in the city.

Money supply has also continued to grow, now at $34,5 billion as per latest figures provided by the central bank through the Monetary Policy Committee, at least $3,5 billion will have to be injected to get to the 10 percent of money supply target.

Speaking to The Herald Finance and Business, economic analyst Persistence Gwanyanya said production is key at the moment, as it is necessary in stabilising the currency.

“But whilst I talk about currencies and the fiat monies I would want to hasten to say a currency is not a permanent solution to the country’s problems, Zimbabwe today faces structural long term problems that need to be sorted out through long-term solution and the only long-term solution on site is production.

“Now we need to start to seriously produce otherwise we will not get out of our currency crisis if we don’t produce. What is really important is to tackle the issue of production and confidence head-on so that our currency becomes stable,” he said.

Meanwhile, Pan African Chamber of Commerce board member, Langton Mabhanga said lack of financial discipline has resulted in the deterioration of industries and productivity in the country, which are the long-term solutions to the country’s ailing economy.

Mr Mabhanga said the currency issue is not a long term solution.

“Fundamentally our challenges are not a currency issue, and this is why it is difficult for us to de-dollarise. After the Reserve Bank of Zimbabwe injected the new notes, they first hit the black market domain coming straight from the banks, and that is a demonstration of the stench in our financial system which needs to be cleansed.

“We really need to have the financial sector cleansed. We would rather have two ethical banks than too many that are not serving any purpose but fleecing the transacting public and fuelling inflation,” he said.

“If we are able to direct and appropriately deploy the huge RTGS balances that reside in the banks and ensure that the new higher denomination notes that the RBZ anticipate to introduce do not fly in the black market domain, then only shall the currency stabilise and gain confidence,” added Mr Mabhanga.

Zimbabwe has been undergoing a currency change from the use of multiple currencies to the re-introduction of local currency – Zimdollar – since last year.