HARARE – Zimbabwe has limited capacity to stop economic bleeding and mitigate liquidity constraints due to its inability to ease the markets quantitatively by controlling money supply, according to the Zimbabwe National Chamber of Commerce (ZNCC).
Prior to the introduction of a multi-currency regime in 2009, the country — through the Reserve Bank of Zimbabwe (RBZ) — had been printing the local currency to alleviate chronic cash shortages that had gripped the country.
Brains Muchemwa, ZNCC’s macroeconomics committee chairperson, said Zimbabwe has been battling to curb an intensifying liquidity crisis at a time when “quantitative easing has of late become the fashionable policy intervention mechanism in the developed world to jump-start growth and stop companies from collapsing.”
“It is the view of the ZNCC that government is incapacitated to intervene directly,” he said.
“Rather, government should put emphasis on reforms that will create the proper environment that enables the private sector to access credit,” said Muchemwa.
“Areas in need of attention include capitalising the Reserve Bank of Zimbabwe as well as restoring its lender of last resort functionality,” the economist said, adding that “more importantly, the role of the RBZ as a banker of the government needs to be urgently implemented.”
He said measures aimed at deepening of the financial sector will need to be pursued in order to build confidence and eliminate inherent vulnerabilities within the banking sector.
“All these measures, if implemented, will create a stronger RBZ that will be able to play a big role in influencing credit creation within and among banks in the market and resultantly address some of the financing challenges facing industry today.”
Muchemwa noted that there was need to bolster the liquidity position by compelling use of offshore credit lines for the purposes of key purchasing commodities such as diamonds just in the same manner that tobacco is marketed.
The call on government to implement austerity measures aimed at restoring the central bank’s functionality comes at a time when its key mandate has come under renewed focus since its functions have been restricted because of the introduction of multi-currency in 2009.