News / Press Release
Ramifications of the worsening liquidity crisis worrying - PDP
12 May 2017 at 11:58hrs | Views
The People's Democratic Party is disturbed by the developments in the Zimbabwean economy; the reports in the main newspapers this week demonstrate part of our concern.
The Financial Gazette carries a report which highlights that at least US$40 million dollars is being lost by industry monthly owing to wages being paid to unproductive workers who are forced to spend many hours queuing at banks.
Industrial Psychology Consultants (IPC) estimates that US$500 that would have been lost by the end of the year due to production hours spend in bank queues at the expense of production.
Our concern is that ZANUPF has failed to deal with the liquidity crisis deciding to implement piece meal remedies which in one way or the other have backfired or even worsened the situation. The liquidity crisis is without doubt crippling economic activity which deals a significant blow to any hope of recovery.
Introduction of the bond notes is one such kindergarten scheme wrongly prescribed by the RBZ and ZANUPF, the PDP was opposed to the move for many reasons.
In our press statements we stated that the scheme was illegal, based on a non-existent loan. More importantly we said that the bond note was the Zimbabwean dollar being brought through the back door.
We argued then as we do now that a national currency at the end of the day is a relationship that captures the country's productive capacity. It reflects a country's output and the strength, quantity and quality of its real economy.
Since 2012 GDP growth has been on a down ward spiral with growth in 2015 standing at -1,8 % and -3.8% in 2016. Output has collapsed as reflected in the trade account, where the current account deficit, even by conservative IMF estimates stood at -15.2 % of GDP in 2014 and -10.3 % in 2015.
We argued that a currency is a measure and indicator of the existence or otherwise of a social contract. A currency reflects in part the respect and confidence that the citizen has in the state or government.
In this regard countries with contested legitimacy tend to suffer invariable currency collapses. An abused citizen simply rejects the authority of the state and the local currency becomes an immediate causality.
ZANUPF dismissed the idea that the bond note was indeed the Zimbabwean Dollar and even said the rate will be equivalent to the United States dollar.
The report in the Zimbabwean Independent that the bond note has weakened against the US dollar thoroughly vindicates the argument we have consistently put across.
Rates for electronic and mobile transactions transfers, including EcoCash and Zipit ranged between 15-20% this week. On cash transactions, bond notes are trading at a discount of 5%.Instead of a par value of 1:1, dealers are, for example, selling US$100 for $105 in bond notes. The cash rate fluctuates to as low a minimum of 4% depending on the supply.
Despite ZANUPF's command and control tactics many outlets continue to have separate prices for the US dollar, the bond note and electronic transfers.
The liquidity crunch also created problems at the Tobacco auction floors where farmers ended up being tear-gased by police officers.
We are aware that as much as we proffer solutions in our commitment to the provision of thought leadership, ZANUPF will not listen. They do not only lack the commitment but largely because they do not get it.
The ultimate solution available for the Zimbabwean people is to unite, get rid of Mugabe and ZANUPF. We however restate that the following steps can roll back the liquidity crunch.
Together Another Zimbabwe is Possible
The Financial Gazette carries a report which highlights that at least US$40 million dollars is being lost by industry monthly owing to wages being paid to unproductive workers who are forced to spend many hours queuing at banks.
Industrial Psychology Consultants (IPC) estimates that US$500 that would have been lost by the end of the year due to production hours spend in bank queues at the expense of production.
Our concern is that ZANUPF has failed to deal with the liquidity crisis deciding to implement piece meal remedies which in one way or the other have backfired or even worsened the situation. The liquidity crisis is without doubt crippling economic activity which deals a significant blow to any hope of recovery.
Introduction of the bond notes is one such kindergarten scheme wrongly prescribed by the RBZ and ZANUPF, the PDP was opposed to the move for many reasons.
In our press statements we stated that the scheme was illegal, based on a non-existent loan. More importantly we said that the bond note was the Zimbabwean dollar being brought through the back door.
We argued then as we do now that a national currency at the end of the day is a relationship that captures the country's productive capacity. It reflects a country's output and the strength, quantity and quality of its real economy.
Since 2012 GDP growth has been on a down ward spiral with growth in 2015 standing at -1,8 % and -3.8% in 2016. Output has collapsed as reflected in the trade account, where the current account deficit, even by conservative IMF estimates stood at -15.2 % of GDP in 2014 and -10.3 % in 2015.
We argued that a currency is a measure and indicator of the existence or otherwise of a social contract. A currency reflects in part the respect and confidence that the citizen has in the state or government.
In this regard countries with contested legitimacy tend to suffer invariable currency collapses. An abused citizen simply rejects the authority of the state and the local currency becomes an immediate causality.
ZANUPF dismissed the idea that the bond note was indeed the Zimbabwean Dollar and even said the rate will be equivalent to the United States dollar.
The report in the Zimbabwean Independent that the bond note has weakened against the US dollar thoroughly vindicates the argument we have consistently put across.
Rates for electronic and mobile transactions transfers, including EcoCash and Zipit ranged between 15-20% this week. On cash transactions, bond notes are trading at a discount of 5%.Instead of a par value of 1:1, dealers are, for example, selling US$100 for $105 in bond notes. The cash rate fluctuates to as low a minimum of 4% depending on the supply.
Despite ZANUPF's command and control tactics many outlets continue to have separate prices for the US dollar, the bond note and electronic transfers.
The liquidity crunch also created problems at the Tobacco auction floors where farmers ended up being tear-gased by police officers.
We are aware that as much as we proffer solutions in our commitment to the provision of thought leadership, ZANUPF will not listen. They do not only lack the commitment but largely because they do not get it.
The ultimate solution available for the Zimbabwean people is to unite, get rid of Mugabe and ZANUPF. We however restate that the following steps can roll back the liquidity crunch.
- The government must implement supply side solutions allow people to work in productive sectors not in speculative industries of willy-dealing capital where you find ZANUPF linked cartels of tenderpreneurs.
- The government must return the money they took from the RBZ because transfers of online money without real value will also not work. The politicians who used these monies for personal gain must take responsibility and pay back
- Run a tight fiscal schedule to avoid the disequilibrium prevailing now, in short the government must live within its means.
- It is our respectful contention that the government must immediately scrap Bond Notes. In the process of scrapping off these Bond Notes, the government must encourage the use of alternative money particularly debit cards, point of sell machines and RTGS facilities.
- Attend to the structural issues arresting the economy to ensure that the economy starts producing again.
- Deal with the cost of doing business that is the cost of labour, the price of electricity and fuel to match the standards being used in the rest of the region.
- In the long term Zimbabwe must ensure regional integration and the creation of a Southern African monetary union which can only work when our economic fundamentals are right.
Together Another Zimbabwe is Possible
Source - Jacob Mafume PDP Spokesperson
