HARARE – Economic experts have warned afresh that Zimbabwe’s economy is in dire straits and that authorities need to move with more urgency and vigour to mitigate the country’s plummeting fortunes.
The warning comes in the wake of the country’s worsening liquidity and cash crises, the economy contracting precipitously, thousands of companies shutting down, unemployment hovering at well over 90 percent, and the Zimbabwe Stock Exchange losing more than $2,5 billion of its value as foreign investors flee.
“The cash crisis is a reflection of structural deficiencies and distortions in the economy,” Labour and Economic Development Research Institute of Zimbabwe chief economist, Prosper Chitambara, said.
“The insanity of Mugabenomics caused hyperinflation and the well documented destruction of the Zimbabwe dollar.
“Switching the system over to United States dollars provided some respite, but failure to effect urgently required fixes meant this was only ever going to be temporary. That wasted period of ‘extra time’ is over,” South African economic analyst Alec Hogg said.
He said Zimbabwe’s cash shortages highlighted the struggle that the government faced in resuscitating an economy that was now half of the size it was 15 years ago.
The worsening cash crisis has forced the central bank to limit daily cash withdrawals to $1 000, amid further plans to introduce bond notes to be backed by a $200 million Afreximbank loan.
But in reality, daily withdrawal limits have gone done to as low as $50 in some banks, as depositors have rushed to withdraw all their money before the introduction of the bond notes.
The panic withdrawals have seen a leading local safari company warning visiting tourists that “with the recent cash shortage in the country and the possible introduction of bond notes, our guests are advised to travel with cash in small denominations so as to avoid disappointment and unnecessary headaches”.
In addition, long-forgotten foreign currency dealers and cash barons are back in business, “selling” cash for a 10 percent premium, in exchange for electronic cash transfers.
“I get substantial amounts of cash from my businesses and it makes business sense to distribute the money to people in need of it at a premium than to deposit it in the bank,” a local businessman who preferred anonymity said.
FBC Holdings chairperson Herbert Nkala has recommended that Zimbabwe would be better off if it expeditiously shifts to using the South African rand, in the wake of worsening dollar shortages.
“My view is that while the rand is certainly not ideal, as South Africa has its own issues, we import most things from Mzansi. We just need to be realistic and embrace the rand,” he said, adding that “the alternative is not attractive”.
“Almost certainly, the easiest way forward is to move increasingly to the rand. It does not have the desirability of the US dollar, but at least there is relative confidence in the unit.
“The quicker this happens in this country — dual pricing and the like — the softer the landing we are going to have in the months ahead,” Nkala said.