Five things from Mangudya’s statement that Zimbabweans should be worried about

Five things from Mangudya’s statement that Zimbabweans should be worried about

  1. Fewer people want to lend us money

The chances of getting offshore credit into Zimbabwe are getting ever slimmer.

In 2019, there was a sharp decline of 21% in the value of foreign loans for private companies. Companies could only access just over US$1 billion, down from US$1.2 billion in 2018. Agriculture got 79.1% of the loans, up from 62.48% in 2018, as loans to other sectors shrunk. Contract tobacco takes up the bulk of those offshore farm loans.

“The country’s ability to attract offshore lines of credit has remained curtailed due to the perceived country risk,” RBZ admits.

  1. Too much money…

Reserve money – the currency in circulation plus deposits with central bank – went up from Z$3.3 billion at the end of 2018 to Z$8.8 billion in December 2019.

The reason for this were subsidies for fuel, electricity, grain and other essentials, especially in the first half of 2019. Adding to this growth in money supply was Z$500 million in new local currency issued in 2019 to try and ease cash shortages.

  1. The 200 Club

RBZ data confirms what we’ve always suspected; most of the country’s money is in the hands of a few.

The amount of money in the economy, as measured by total bank deposits, stood at ZW$34.5 billion as at 31 December 2019. This was made up of ZW$22.0 billion in local currency and the equivalent of the US$785 million in foreign currency.

Half of this Z$34.5 billion is in the hands of just 200 entities, Mangudya’s statement shows.

It is this stock of money that the RBZ says is its “key focus area” in central bank’s efforts to bring stability to the exchange rate and inflation.

Mangudya, making his speech, appeared keenly aware of the influence of this club of 200.

“None in this room have excess RTGS,” he said, as he gestured to the gathering of central bank officials, bank chief executives, economic analysts and journalists.- NewZwire

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