19 July 2010

Zimbabwe: Country to Import Coins as Cash Crisis Worsens

Coins and notes from other countries will have to be brought into Zimbabwe to relieve the serious shortage of cash, Finance Minister Tendai has announced.

The plans were unveiled as part of Biti's Mid-Term fiscal policy review statement which he presented to parliament last Wednesday.

"Under the current multi currency regime, the inadequacy of smaller denominations has posed a number of challenges in transactions.

"Treasury will, therefore, be facilitating in the last half of 2010 the importation of foreign smaller denominations and coins," Biti said.

The government was forced to ditch the Zimbabwean local currency last year in favour of the South African Rand and US Dollar, because the political crisis and economic meltdown caused record-breaking hyperinflation going above 49 billion percent. The government wants the multi-currency system to remain in place until 2012.

Although this measure has ended the hyperinflation, it has caused cash flow problems. The severe shortage of foreign currency in the country has deterred many Zimbabweans from depositing their money in banks and people are reported to have been literally washing the dirty US$ notes in circulation.

The problem is also negatively affecting businesses, with retailers asking shoppers to take other goods in lieu of change. Trade policy analyst Albert Makochekanwa says a decision to adopt a single currency has to be made in the near future.

Biti has conceded that sourcing funds is a problem. The 2010 budget targets to raise US$810 million but by the end of the first quarter of 2010, only US$2.9 million was received. The economy has remained under severe stress, with the government forced to review its growth target from 7.7 percent to 5.4 percent.

Donors and countries which have indicated they will pour money into Zimbabwe's coffers, are reluctant to do so until the government fully implements the Global Political Agreement and establishes the rule of law.

Biti also added that laws such as the Indigenisation Act had deterred investors from Zimbabwe. "The poor performance is as a result of investors pulling out their investments reflecting depressed investors' sentiment over perceived financial risks, especially following gazetting of the Indigenisation Regulations on March 1," he said.

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