News / National
Zimbabwe panics as wheels come off
15 Apr 2017 at 14:53hrs | Views
With Zimbabwe's economy continuing to die - as manifested by rising poverty levels, worsening job losses and severe cash shortages - the government is showing signs of panic, amid fresh warnings by experts that the country is headed for an economic disaster akin to the meltdown of 2008.
This comes as the Reserve Bank of Zimbabwe (RBZ) has set the maximum limit for cash back facilities by retailers and wholesalers at $20, as authorities desperately try to mitigate the country's worsening cash crisis which is forcing long-suffering Zimbabweans to spend hours at banks queuing for their money.
"Any cash-back facility made available by retailers and wholesalers shall not exceed an amount of $20.
"The Reserve Bank shall collaborate with wholesalers, retailers and their associations to ensure the adequate provision of Point of Sale (POS) machines in order to enhance the use of plastic money for transactions," the under-pressure central bank said on Thursday.
But a government source who spoke to the Daily News yesterday said the country's bigwigs were "panicking" over the ever-deteriorating state of the economy.
"I won't lie to you, we are all panicking. While it's clear that the Reserve Bank is doing its best, unfortunately our problems are deeper than the central bank's mandate, which is why they appear to be treating the symptoms and not the causes of the problems," the senior official said.
An executive with a retail chain, who spoke on condition of anonymity, also criticised what he called "panicky, knee-jerk" policy pronouncements by the government that he felt would not mitigate the dire situation obtaining on the ground.
"We have now reached a situation where we do not know whether to laugh or cry. I mean, what kind of policies are these where we are compelled to bank our money but can't get this cash back when we need it?
"Our biggest fear is that this is more and more looking like the nightmare of 2008 . . . and while I'm not one of (People's Democractic Party leader Tendai) Biti's admirers, I think he was correct when he described our economy as a Ponzi scheme (a fraudulent investment operation)," he said.
On its part, opposition leader Morgan Tsvangirai's Movement for Democratic Change (MDC) said the RBZ should "simply own up and declare that the prevailing cash crisis is beyond its control".
"The wheels have totally come off," MDC spokesperson Obert Gutu told the Daily News yesterday.
"The bond notes experiment has been a spectacular flop. The chickens are coming home to roost.
"What Zimbabwe needs and needs very urgently, is a lasting solution to its long standing political and socio-economic crisis.
"These stop-gap measures like limiting cash backs to be paid by retailers simply won't do. We need to cure the cause of the disease, not just rushing to suppress the symptoms," he said.
PDP spokesperson Jacob Mafume alleged that senior government officials were "the biggest hoarders of cash" in the country and not ordinary Zimbabweans who were targeted by the new monetary measures.
He also said the RBZ was "criminalising what is ordinary economic activity in other countries".
Economist Kipson Gundani said the new cash back limits showed that Zimbabwe had entered "an era of cash rationing" - adding that he did not expect the measures to end the country's severe cash shortages.
Mfundo Mlilo, a governance and public policy expert, also said the cash back limits reflected the fact that the country's cash crisis was worsening.
"The money supply situation is worsening and this will negatively affect aggregate national demand . . . It's an ungodly act at Easter," Mlilo said.
Other economists warned that the cash crunch would pull down Zimbabwe's gross domestic product (GDP) growth and spawn a recession, with companies and traders relying on cash set to be worst affected.
Economist Prosper Chitambara said the new regulations were a desperate measure to curb the country's worst financial crisis in eight years, but would not succeed.
"Definitely, this won't address the problem . . . this is a confidence issue, as there are uncertainties in the market. People have no confidence in using the formal system," he said.
In the meantime, Zimbabwe's worsening cash crisis has forced banks to reduce further their daily withdrawal limits - in addition to suspending dispensing money through Automated Teller Machines (ATMs).
This prompted analysts who spoke to the Daily News recently to say that this confirmed that the local economy was dying and "hurtling towards total collapse".
It also comes as most banks are now disbursing a maximum of $30 dollars a day, down from their usual $100 - while those that had capped the maximum withdrawal limit at $500 a week have pulled this back to $200.
The cash shortages are also continuing to worsen despite the recent opening of the tobacco marketing season.
Economic advisor to President Robert Mugabe, Ashok Chakravarti, told the Daily News last week that the escalating cash crisis was a result of "long-term problems" that came after the country opted to have one of the world's strongest currencies, the US dollar, as its anchor currency.
"We have close to $6,5 billion in deposits and at the end of January we had a little over $300 million in cash circulating.
"Under such circumstances, it only makes sense that we have shortages. Do not blame the banks, it is not their fault, they are only looking for a coping mechanism," Chakravarti said.
He recommended that the government should adopt the South African rand and ditch the dollar.
"I have said this before, we need a weaker currency. The weaker, the better for us. As South Africa has just been downgraded, this is an opportune time. What we just need is a weaker currency," he added.
Veteran economist John Robertson said the cash problems were going to persist until the government urgently fixed the country's economic fundamentals.
"This has been going on for the past year and in my view, the situation is not likely to improve in the near future because economic fundamentals remain the same.
"Government's wage bill still makes up the majority of deposits and as soon as those deposits are recorded, civil servants want to withdraw the money. But there is essentially no money in the system . . . Not even tobacco earnings will save us this time" Robertson said.
The cash shortages come as there are growing fears that the country's economy may soon hit the disastrous lows of 2008 - as bond notes continue to lose their value against the United States dollar, with the coveted greenback now almost completely unavailable on the open market.
At the same time, economists have also told the Daily News that poverty levels in the country are skyrocketing, with average incomes now at their lowest levels in more than 60 years - and with more than 76 percent of the country's families now having to make do with pitiful incomes that are well below the poverty datum line of more than $500.
Economists have also warned of a fresh round of sharp rises in the prices of basic goods, including foodstuffs - as the US dollar continues to vanish from the market, leading political analysts to worry about renewed civil unrest in the country.
Biti, who is the country's former Former Finance minister has also said that Zimbabwe is heading for an economic calamity which would see the government formally reintroducing the Zimbabwe dollar which has been decommissioned.
"They are already printing what we call Zollars, an amphibious creature which is half Zimdollar and half US dollar that is reflected in treasury bills and bond notes which have no cover.
"This is reflected in unfinanced RTGS (real-time gross settlement) and debit card transactions. We have created hot air, and as a result broad money supply, M3, must be frightening. It must be close to 60 percent of GDP. We are heading straight to hyperinflation.
"Zimbabweans must prepare for a long winter of despair. It's in Zanu-PF's DNA to print money and just spend it as if there is no tomorrow. The flood gates are open and will drown us. It's just a question of time now," Biti said.
Source - dailynews