The Herald (Harare)

Zimbabwe: Economists Must Step Up, Justify Existence

editorial

FINANCE Minister Patrick Chinamasa and new Reserve Bank of Zimbabwe Governor Dr John Mangudya agree that Zimbabwe's immediate biggest challenge is the shortage of cash. This has a big impact on Government operations and the way ordinary people run their lives.

But there have been unconfirmed reports that there is between US$6 billion and US$7 billion circulating in the informal sector, that is to say money which is not captured in the bank system. There is next to no information why banks are failing to attract this money except rumours of lack of confidence in the banking system.

But if the figures of money in circulation in the country are true, it means the authorities have to find ways of capturing that money. We are talking about foreign currency that is earned from mineral exports, Diaspora remittances and whatever little industry is able to export.

But it turns out that money is managed very badly as if we had tonnes of it. Our laws allow an individual to take out of the country as much as US$10 000 per trip without any questions asked. That money can be used to open a foreign currency account. Change can be used to import cheap goods for resale, to earn more foreign currency which is again exported.

We need a way to plug these outflows. And the authorities don't appear to be in a hurry to deal with this serious issue.

At the moment Zimbabwe attracts very limited Foreign Direct Investment. But given that there are no controls on how much money one can take out of the country at any one time, even FDI would be wasted. It is like trying to fill a bottomless can with water.

Why not impose limits on how much can be taken out of the country at a time or even have people use travellers' cheques?

Then there is the issue of the local currency which has not been addressed comprehensively since Zanu-PF's electoral victory in last year's harmonised elections. Government as a whole appears held hostage by those who love to hawk the ghost of 2008. We are told the return of the Zimbabwe dollar will scare away investors. On the other hand we are daily told of companies closing down even without the scary local currency. That means there is something outside economics at stake.

Local "economists" have been as scarce as the local currency. Besides making political statements, there has been no authoritative voice for or against the return of the Zimbabwe dollar. Is it being suggested in any way that Zimbabwe's economic fundamentals are the worst in the region or that politically we are the most unstable nation just because a loser made a protest against the winner?

We are raising these issues because the absence of a local currency affects business transactions. And here we are talking a proper currency, not the bearer cheques. Why should a Zimbabwean use hard currency to buy a wild fruit like mazhanje (loquat)? Is that reflective of a nation experiencing a cash crunch that it is determined to resolve it?

It is common knowledge that none of the regional currencies is convertible. All Sadc countries use their currencies internally or with limited circulation in the region for the South African rand. Governments are then able to control the flow of money for ease of transaction.

Instead, we have reduced a majority of Zimbabweans, especially in rural areas, to barter trade because there is no foreign currency!

How strange.

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