…as experts call for local currency, devaluation
Taurai Mangudhla
HARARE – Zimbabwean banks last year imported about $700 million for cash withdrawals all of which has disappeared from the formal banking channels in apparent show of lack of confidence.
The $700 million is a global figure for all cash imports by individual banks and the central bank, Reserve Bank of Zimbabwe (RBZ) deputy governor Dr Kupikile Mlambo told an Actuarial Society of Zimbabwe (ASZ) convention in the capital this afternoon.
“In 2017, both banks and ourselves imported $700 million? Where is it now? It’s not sitting in the banks, but vaults in the northern suburbs,” Dr Mlambo said, adding this was a result of lack of confidence.
“There was a lot of money coming in (FDI, lines of credit and diaspora remittances) but by 2013 money started going out. It wasn’t chasing imports just going out (because) there was loss of confidence.
There is nothing that happened in 2009 but people had confidence in the future. Confidence is one thing that is a constraint. If people trust the system they respond better,” Dr Mlambo said.
Zimbabwe formed an inclusive government-between the MDC – T and Zanu PF- in 2009 and introduced a multiple currency regime. In 2013 President Robert Mugabe formed his Zanu PF government with a majority in parliament. Mugabe’s tenure came to an end in November last year.
Dr Mlambo said confidence is undermined by isolation without re-engagement with the international community, increasing the country’s risk profile.
He said the country also, like President Emmerson Mnangagwa keeps emphasising, needs to deal with issues like corruption in order to restore confidence.
Talking about the cash crisis, Dr Mlambo said: “From 2009 to 2015 we did not suffer any challenges with regards to cash and foreign currency, but we were also using the US dollar and the rand as major currencies in the basket. By the third quarter of 2015 the rand disappeared so we had one currency carrying the burden. Our net current account deficit also widened to $3 billion.”
Harare actuary and First Mutual Holdings CEO Douglas Hoto also said Zimbabwe’s problem was that of confidence, adding the country needs its own currency.
“The problem is of a country which does not have a currency of its own. It’s not a good thing to have the US dollar as our own currency, that’s why it’s a commodity in this country…the fundamental problem in Zimbabwe is not nostro balances, but confidence,” Hoto said.
Life insurance expert Elizabeth Bvukwa said the insurance sector has also been facing challenges due to a confidence crisis. “Confidence is low due to what happened before… If those issues are not addressed we could have a second challenge in the industry,” she said.
“There is low penetration given closure of companies from 2009. Our economy is mostly informal and the informal sector usually doesn’t consume insurance and pension products,” Bvukwa added.
Harare investment banker Itai Chirume said there is need to bring sanity to the economy through devaluation, curtailing money supply and attracting economic packages from IFIs.
“We need to address the currency situation otherwise we will not enjoy the full benefits of our capital markets…banks are not enjoying nostro liquidity when foreigners take part on our markets,” he said.
Chirume said currently, foreigners find it expensive to take part in capital markets because they use hard currency while locals can, for the same amount of US dollars, get 60% more value.
Chirume said government is worsening the confidence crisis by issuing more bonds and effectively increasing money supply.
Dr Mlambo said the parallel market is currently being driven mainly by the real variation between RTGs and nostro balances.
He also added that private companies also increase money supply when they borrow or get overdrafts.
