Current Central Bank governor John Mangudya says he cannot understand why the country has a cash crisis because it should have $1 billion in circulation.
“The current stock of money in circulation in Zimbabwe is made up of bond coins ($25 million), bond notes ($175 million) and multi-currencies dominated by the U.S. dollar at approximately $800 million, to give a total of around $1 billion,” he said in his latest monetary policy statement.
“This quantity of money in the economy is quite sufficient to support the usable bank balances, as measured by the RTGS balances, currently sitting at around $1.6 billion within the banking system.
“The amount of money in circulation is around 62.5% of RTGS balances and/or 15.5% of the total deposits as measured by M2 of around $6.2 billion.
“For all intents and purposes, and in line with international best practice, the money in circulation in the Zimbabwean economy is sufficient to support money supply as measured by M0, M1 or M2.
“What therefore makes the situation in Zimbabwe unique is that money in the economy is not circulating efficiently within the formal economy.
“Its confined to the informal sector and/or the parallel markets.”
Mangudya said cash shortages were caused by rent seeking behaviour, externalisation motives since the US dollar is a highly sought-after currency, corruption and lack of confidence which is induced by indiscipline.
According to Mangudya to solve the cash crisis:
- The Zimbabwe Revenue Authority should ensure that the exportation of cash, including bond notes, by travellers is within the authorised limits,
- Banks should ensure that business point of sale (POS) machines are not linked to individuals’ accounts. This malpractice or financial indiscipline is negatively affecting the tax base as business accounts reflect little business while most of the transactions are being reflected in individual accounts.
- Adherence to the cash-back current policy in place, and
- Going digital, embracing plastic money, to avoid queuing for cash at banks and in order to preserve foreign exchange for foreign payments.
Things have so far not worked. No one can do or is willing to do what Mangudya say because some people they are profiting from the chaos.
The question remains, why is there no money at the banks but there is plenty on the streets. Where are those on the streets getting the cash?
Continued next page
(801 VIEWS)
0 Comments