Zimbabwe cash shortages to ease in two months


The plan is to continue drawing from these facilities so that we continue liquefying the markets.

This amount of money ordinarily would be enough to serve our cash needs but we have said it many times that the problem is that the money is not circulating.

The biggest challenge that we have in Zimbabwe is poor circulation of money.

If the money was circulating, we would not be having the cash challenges that we are having. Zimbabweans are looking at foreign currency as a store of value and not as something that they should circulate.

Instead of circulating the money in our country, a good number of our people take the money out of the country by paying for DSTV, paying for school fees for their children in foreign countries, shopping in other countries and many other means of cash flight.

There are also other payments such as raw materials and service payments.

Another point is that we now see foreign currency as a commodity. People are selling their foreign currency on the market because they see it as an asset that can fetch a higher price instead of using it for transactions.

We can call it black market, but now people see it as a business. If the supply was sufficient it means no one would be buying it.

It is also about demand and supply. It’s all about economic fundamentals.

We now see it as an investment, so instead of investing in production our goods and services, we now invest in having foreign currency, which stops the greenback from circulating effectively on the formal markets.

This is typical of a country which has a deficit of foreign currency.

On this US$400 million it is difficult to know how much is going to the parallel market because the difficulty about using foreign currency is that it has multi purposes. Therefore if you want to sustain usage of foreign currency you need to earn more of it.

The only sustainable way of getting more of it is through ploughing it back into production or investing in assets. The main point is that if your exports are lower than your imports, there will always be a challenge. It’s difficult to get more foreign currency, other than borrowing.

When expenditure is more than the revenue, we have an overdraft. The context is very important that production is the only sustainable way of mitigating foreign currency shortages in Zimbabwe.

We need a paradigm shift in understanding foreign currency shortages in Zimbabwe, than just blaming Government.

We also need to look at ourselves as a people and assess the role that we are playing in the production cycle and also the role we are playing in earning the foreign currency that we are crying for.

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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