Industry battles falling aggregate demand

LIVINGSTONE MARUFU

Industry is battling declining aggregate demand with executives and economists warning that the government should not restrict supply to stimulate demand for the Zimbabwe dollar as the move is likely to result in job cuts and negative economic demand.

They alleged that the government had artificially stabilised the exchange rate by manipulating it.

“The authorities should allow supply and demand law to take centre stage here not suppress supply to create demand, instead most businesses and consumers have resorted to use United States dollar and leave the Zimbabwe dollar on the brink,” economist Gift Mugano told Business Times.

“It’s a tragedy that the purported stability came at the expense of aggregate demand and bringing the economy to a grinding halt as people are going to the informal businesses that do not pay taxes and rates resulting in fiscus losing significant revenues.”

He warned that if the current liquidity squeeze continues the country’s Gross Domestic Product will record a negative growth as the liquidity has slowed economic activities.

“Instead of creating demand for the Zimbabwe dollar, various companies have shelved local currency and have gone full throttle United States dollar, this means the government has promoted full dollarisation.

“Instead, the government has lowered the coffin of the Zimbabwe dollar and one more pronouncement is needed to bury it underground,” Mugano said.

CZI president Kurai Matsheza said the industry was facing difficult moments.

“We have a challenge that is threatening to choke us all as the aggregate demand continues to come down as the volumes for retailers fell 40% and further went down.

“On the manufacturing side, the order quantity levels are coming down and we don’t know where we are heading especially in these times of elections,” Matsheza said.

Retailers are concerned with dwindling sales volumes. N.Richards manager Archford Dongo said retailers are in big trouble as buying power shrinks.

“Traffic is very low in most wholesale and retail outlets across the country as the aggregate demand goes down.

“I can tell you that I was in a retail outlet and for the past 10 minutes there was not even one customer who came in.

“The basket has started shrinking towards the basics,” Dongo said.

The Bankers Association of Zimbabwe CEO, Fanwell Mutogo said the banks have scaled back on lending and are not extending overdrafts.

“We can confirm that Zimbabwe dollar liquidity is tight at the moment, and banks, like other sectors in the economy, are constrained by the liquidity squeeze currently prevailing.

“We understand the government’s position as regards the liquidity measures which have been implemented given what was happening in the economy, however, we believe the current tight liquidity situation is an unintended consequence of the measures,” Mutogo said.