No South African bailout for Zim!

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Bernard Mpofu

Zimbabwe’s plan to seek an emergency financial package from South Africa suffered a big blow after the region’s economic powerhouse cited budgetary constraints as it prepares for its next general elections in May, it has been learnt.

Zimbabwe’s economy is floundering as seen by quickening inflation, high unemployment levels, a weakening surrogate currency and fuel price hikes.

The country needs foreign currency to import fuel and drugs among other critical essentials.

On December 26, finance minister Mthuli Ncube took a delegation of senior government officials including Reserve Bank of Zimbabwe governor John Mangudya and Secretary for Finance George Guvamatanga to neighbouring South Africa where he held a high level meeting with his counterpart Tito Mboweni. Also in attendance were South Africa’s National Treasury director-general Dondo Mogajane and the country’s central bank chief.

It is understood that issues that were discussed in this meeting included Zimbabwe’s currency reforms, financial aid and Zimbabwe’s Transitional Stabilisation Programme.

The United States Dollar, which in August traded at a 50 percent premium against the country’s surrogate currency-bond notes, is now exchanging hands at a 350 percent premium pushing for prices of basic goods and services.

The price hikes saw annualised inflation reaching 20,85 percent in October, the highest since the introduction of the multiple currency regime mainly dominated by the dollar. In November inflation further rose to 31 percent, eating into disposable incomes of workers.

“This meeting came against a backdrop of fuel shortages and other critical needs. Minister Ncube appealed to the South Africans for a financial package of around $1 billion but he was told that South Africa was currently not in a position to extend that aid because it will soon hold elections,” a source said.

Questions sent to South Africa’s Finance ministry were not responded to while Ncube could not reached for comment as he is away on government business.

Contacted for comment Guvamatanga referred all questions to Ncube.

Last week,  Ncube said Zimbabwe plans to have its own currency within the next 12 months as government struggles to sustain the multi-currency regime introduced in 2009 to tame unprecedented inflation.

He said is working on raising enough foreign currency to anchor the local unit.

Addressing delegates at a “Road to Davos” townhall meeting held in Harare Ncube said adopting the United States dollar or the South African rand would not solve the country’s macro-economic problems.

“On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years,” he said.

After being further asked to give a timeline on when currency reforms would be implemented, Ncube said it would be done “in less than 12 months”.

Reports from South Africa also show that Mboweni also supported government’s plans to re-introduce its own currency to ease the liquidity constraints.

“I think the idea of using a new currency in Zimbabwe is a good one,”  Mboweni told journalists ahead of his trip to Davos, Switzerland, for the annual World Economic Forum (WEF).

“I think our colleagues there are on a good wicket when it comes to that space. We are working together very well, but at the end of the day it is Zimbabweans who need to fix their country.”