News / National
'Zimbabwe economy heads for a bloodbath'
11 hrs ago | Views
Former Finance Minister Tendai Biti has issued a stark warning of a potential economic bloodbath if Zimbabwe does not liberalize its exchange rate and inject liquidity into the economy. His concerns come amid persistent liquidity shortages, exchange rate volatility, and a surge in business closures and corporate rescues.
"Companies are paying the price of an uncertain political regime and exchange rate mismanagement. The introduction of the Zimbabwe Gold (ZiG) currency has only brought chaos to the economy," Biti told NewsDay Business.
The ZiG was introduced in April last year as Zimbabwe's sixth attempt to establish a stable currency in over a decade. However, Biti criticized its implementation, stating that it has worsened economic instability.
Biti warned that businesses are struggling with punitive debt charges and limited access to affordable capital, which could lead to a complete collapse in aggregate demand.
"It's going to be a bloodbath for businesses in 2025," he added.
To prevent this, Biti emphasized the urgent need for liquidity. He advocated for cheaper access to funding, arguing that businesses must have the means to survive and thrive in a more stable economic environment.
Additionally, Biti criticized export surrender requirements, describing them as an unnecessary burden that hampers access to foreign currency. Under current regulations, exporters are required to surrender 25% of their proceeds in exchange for local currency at the prevailing interbank exchange rate.
"Export surrender requirements are an additional threat to business. Removing them would ensure a huge chunk of foreign currency is available in the market," Biti said.
He also called for the abolition of money transfer fees, which he said are stifling economic activity and increasing the cost of doing business. "These fees are choking businesses and making it impossible for them to operate efficiently," he said.
Biti expressed deep concerns over the ongoing political uncertainty, exacerbated by calls for President Emmerson Mnangagwa to extend his term beyond the constitutionally mandated two terms ending in 2028.
"The uncertainty created by Mnangagwa's third-term ambitions and the removal of key officials is discouraging investment and deepening the crisis. Such moves create suspicion and erode trust in governance," Biti said.
Mnangagwa recently appointed new heads for the police and intelligence agency, further fueling concerns of political interference.
Economist Chenaimoyo Mutambasere echoed Biti's concerns, pointing to a grim economic outlook. She highlighted that the 2025 budget requires US$38 billion to address the country's needs, while government revenue and expenditure are both pegged at just US$7 billion.
"With 60% of the population already living in extreme poverty, the situation is dire. The country needs a miracle to recover," she said.
Over the past year, companies such as Beta Bricks, Khayah Cement, and Truworths have either shut down, downsized, or sought corporate rescue in response to worsening economic conditions.
"Companies are paying the price of an uncertain political regime and exchange rate mismanagement. The introduction of the Zimbabwe Gold (ZiG) currency has only brought chaos to the economy," Biti told NewsDay Business.
The ZiG was introduced in April last year as Zimbabwe's sixth attempt to establish a stable currency in over a decade. However, Biti criticized its implementation, stating that it has worsened economic instability.
Biti warned that businesses are struggling with punitive debt charges and limited access to affordable capital, which could lead to a complete collapse in aggregate demand.
"It's going to be a bloodbath for businesses in 2025," he added.
To prevent this, Biti emphasized the urgent need for liquidity. He advocated for cheaper access to funding, arguing that businesses must have the means to survive and thrive in a more stable economic environment.
Additionally, Biti criticized export surrender requirements, describing them as an unnecessary burden that hampers access to foreign currency. Under current regulations, exporters are required to surrender 25% of their proceeds in exchange for local currency at the prevailing interbank exchange rate.
"Export surrender requirements are an additional threat to business. Removing them would ensure a huge chunk of foreign currency is available in the market," Biti said.
He also called for the abolition of money transfer fees, which he said are stifling economic activity and increasing the cost of doing business. "These fees are choking businesses and making it impossible for them to operate efficiently," he said.
Biti expressed deep concerns over the ongoing political uncertainty, exacerbated by calls for President Emmerson Mnangagwa to extend his term beyond the constitutionally mandated two terms ending in 2028.
"The uncertainty created by Mnangagwa's third-term ambitions and the removal of key officials is discouraging investment and deepening the crisis. Such moves create suspicion and erode trust in governance," Biti said.
Mnangagwa recently appointed new heads for the police and intelligence agency, further fueling concerns of political interference.
Economist Chenaimoyo Mutambasere echoed Biti's concerns, pointing to a grim economic outlook. She highlighted that the 2025 budget requires US$38 billion to address the country's needs, while government revenue and expenditure are both pegged at just US$7 billion.
"With 60% of the population already living in extreme poverty, the situation is dire. The country needs a miracle to recover," she said.
Over the past year, companies such as Beta Bricks, Khayah Cement, and Truworths have either shut down, downsized, or sought corporate rescue in response to worsening economic conditions.
Source - newsday
