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

CONCLUSION:

Although the RBZ’s increased level of bank note imports, combined with tobacco sales receipts and a reported jump in first quarter gold production will improve the availability of foreign currency, it is misleading to report that “cash shortages will ease in coming weeks”.

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

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.

Efforts to rein in government spending have also been complicated by wage increases awarded to state employees in recent months.

By Nelson Banya for ZimFact

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