The $400 million injection into the economy might not be the answer to Zimbabwe’s cash crisis


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Reports that cash shortages in Zimbabwe will ease within the coming weeks because the central bank has imported $400 million are misleading because the $400 million cited is already in circulation, fact-checking organisation Zimfact says.

Central Bank governor John Mangudya told the Sunday Mail last week that cash shortages are going to ease within the next two months because the country had imported $400 million and will also draw from the $1.5 billion Afreximbank loan facility to push more cash into the banking system.

“What I want to promise the nation is that within the next two months, the queues are going to be minimised. Starting from the end of this month, we should see increased supply of cash on the market as we get more money from tobacco, gold exports as well as increased supply from our lines of credit,” he said.

Zimfact argues, however, that the bank note imports, combined with tobacco sales receipts and a reported jump in first quarter gold production will improve the availability of foreign currency but this will not necessarily ease the cash shortage.

“This is because the US$400 million cited is already in the economy, with no discernible impact on the bank note shortage situation,” it argues.

“This is also because the economic fundamentals cited by Mangudya for the persistent foreign currency crisis – the twin trade and budget deficits – remain unresolved.

“Although Zimbabwe’s primary mining and agriculture sectors have shown signs of stirring, the manufacturing sector is still some way away from recovery, meaning the trade deficit will take some time to plug.”

Britain has, however, promised to inject $100 million into industry through Standard Chartered bank but this will be over the next five years.

President Emmerson Mnangagwa has said the investment will help ease the cash crisis.

Zimfact also argued that the cash crisis is not likely to ease because efforts to rein in government spending have also been complicated by wage increases awarded to state employees in recent months.

The government recently awarded salary increases to doctors and nurses and also plans to increase the salaries of civil servants but they have so far rejected the revised 15 percent offer.

Below is the full argument by Zimfact:

Continued next page

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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