Economists speak on cash shortages in Zimbabwe

The low uptake of the other legal tenders within the basket of currencies in favour of the greenback has put a lot of pressure on the United States dollar.

Apart from the shunning of other currencies, illicit financial outflows, overreliance on imports and subdued confidence in the banking sector have all combined to create the current cash challenges, according to economists.

The lack of confidence in the banking sector has seen many shunning the financial sector with some opting to keep their hard earned money under the pillow, thereby fuelling cash shortages.

Economist Nicky Moyo says the poor performance of regional currencies in particular the rand and lack of appetite for other legal tenders within the country's basket of currencies have worsened the country's cash situation.

Economist Kipson Gundani says Zimbabwe cash shortages go beyond the issue of currency uptake, with lack of productivity, underperformance of the economy and the huge trade gap contributing to the liquidity challenges.

With the apex bank not in a position to print money, the country has been relying on remittances from Zimbabweans in the Diaspora, foreign direct investment and exports to boost cash inflows.

However, entrepreneur Israel Kembo says the low capacity utilisation and subdued exports have exacerbated the country liquidity position.

According the market analysts, the failure to attract sufficient external funds and the huge debt overhang have not helped in improving the liquidity situation.