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Zimbabwe forex crisis to worsen

by Staff reporter
22 Jan 2020 at 07:21hrs | Views
ZIMBABWE'S foreign currency crisis is expected to worsen this year after gold exports fell by over 28 percent last year.

The southern African country is grappling with acute foreign currency shortages, which have hampered viability and threatened the survival of many companies in the country.

IH Securities said the decline of Zimbabwe's highest foreign currency earner by 28 percent from US$1,33 billion in 2018 to US$946 million in 2019 will have serious effects on the economy.

"Tobacco, also made a subdued performance during the past year, leaving Zimbabwe on the edge of economic implosion due to the rising demand for forex in the economy," the local research unit said.

This comes as severe drought is also expected to slow down economic activity impacting heavily on agriculture, which comprises of the country's second largest forex earner.

Part of government's foreign currency requirements come from forex retentions from exporters. However, economic headwinds have persisted significantly leading to a downward trend in exports.

Figures from the Reserve Bank of Zimbabwe show that gold deliveries fell 16 percent to 27,6 tonnes in 2019 from 33,2 tonnes in 2018.

Meanwhile, experts say low foreign currency will also hit the country this year unless Zimbabwe produces high value-export commodities.

"Companies that have invested in Zimbabwe have been failing to repatriate profit in the form of dividends because of foreign currency shortages and in that scenario investors will not come to Zimbabwe because they can't take their money out," economist Vince Musewe said.

"That money will not get into any Zimbabwean system, that money will be given to a Chinese company that wants to send profit outside the country which means all the income flows and the potential foreign exchange inflows from investment have been cancelled because they are going out with Chinese companies, which starves the country of foreign exchange," he added.

Most companies have been failing to access foreign currency on the interbank market, which remains starved of willing sellers, leaving the black market the only option for the private sector which needs foreign currency to import raw materials.

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Source - dailynews

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