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Zimbabwe govt warned against printing money

by Staff Reporter
29 Dec 2019 at 11:38hrs | Views
Business leaders have warned government to desist from excessive money printing, as it is negatively affecting real growth.

Inflation happens if the money supply grows faster than economic output because there would be a lot more money chasing fewer goods, which leads to price hikes.

"For a prosperous and successful 2020, CEO Africa Roundtable, therefore, calls upon the government to desist from excessive money printing, which is negatively affecting the real sector through influencing interest rates," CEO Africa Round table chairman Oswell Binha said in a statement.

"Too much money printing has far greater consequences for the preservation of currency than any other variables in the universe. Therefore, the most important policy measure to give the currency a fighting chance is firm determination to control money supply growth."

Government reintroduced the local currency in June and declared it the sole legal tender, but has seen its value plummet on the interbank market and the parallel market due to lack of support in the form of foreign currency reserves and market confidence.

As of yesterday, the rate stood at US$1:$17,14 on the formal market and US$1:$22 on the informal one. Ad by Valueimpression

Government has said it would convert excess electronic money into hard cash, but Binha advised that the central bank should ensure that annual money supply growth was below 10%.

"In doing so, the government has the obligation to consult key stakeholders before it introduces key policy changes," he added.

Binha said there was urgent need for an efficient interbank foreign exchange market, which will channel resources into the formal market and moderate the pressure for parallel market drift.

"The parallel market has surfaced and has continued on an upward drift, driven by fears, expectations, rumours and money growth. This will continue to feed through to inflation.

Therefore, there has to be one price for foreign currency, a uniform exchange rate that applies for all foreign currency transactions in Zimbabwe," he said.

Binha also called on government to allow businesses to retain 100% of their foreign currency to enable them to preserve value and guarantee current and future planning of business survival.

Currently, manufacturers are allowed 80% retention on foreign currency from exports, gold producers (55%); all other minerals (100%); tobacco and cotton merchants for input schemes (80%); agriculture and horticulture (80%); and transport and other services (80%).

"While the monetary authorities have committed to avail 50% of the foreign currency retention to the interbank market … I am unequivocally calling for immediate lifting of surrender requirements," Binha said.

The consumptive nature of the economy requires most businesses to have foreign currency to import mostly raw materials to produce goods.

The CEO Africa Round Table is a platform for corporate chief executive officers and senior executives, in both the private and public sectors, created to engender critical economic and business knowledge in and around Africa.

Source - Newsday

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