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Insurance companies, Peoples Savings, Fixed income earners at Risk due to unstable economy.

10 Mar 2019 at 07:04hrs | Views
Zimbabwe financial system is still in a disarray despite the measures unpacked in the monetary policy statement of the first half of year 2019 with Dr Mangudya on 19 February. The economy is continuously gradually deteriorating thereby putting Insurance companies, Peoples Savings, Fixed income earners at danger.

If we are to look at daily presses, articles and advices about Zimbabwe currency reforms from fixed bond notes to liberized RTGS exchange rate against USD's, their range of contents is extensive as some of them are platitudinous truisms and others are abstruse distillations of thought. But the truth is that, the floating exchange has eroded Insurance companies, Individual Savings and Fixed income earners bank balances.

The current market exchange rate in banking halls is 1: 2.50 (USD: Rtgs), meaning people have made a loss of 250% putting in mind that people they saved in Us dollars. Now it has been converted to RTGS the value is not the same.

What it means is, the insurance company that was with 1000 000 bond notes in bank account it now have $400 000 Us dollars. And these companies have lost more than $600 000 provided that they invested using USD's and their investments being indexed in US dollars.

This currency turmoil has put fixed income earners at greater risk especially the pension savings and insurance savings. Floating exchange rate has a negative bearing effect to the insurance industry revenues as a whole, given the incapability's of our nation to retain 1:1 parity.

The move made has a systemic risks to the whole financial system. One of the risk is it deters existing and potential investors due to the inconsistencies in policy making on currency decisions. The paradigm taken contradict with "Zimbabwe is open for business theme"

As a result, there is need for the nation to come up with currency reforms that retain 1:1 value for the sake of boasting investment confidence in Zimbabwe.

In summing up, for any economic policy to work it requires a functional industry. So there need to revive and revamp the domestic business sector, for the country to be attractive in the vicinity of potential foreign investors. Failure to boost the Production sector imply that Zimbabwean economy will continue to fall in the same traps and any currency reform made to revive will experience at still birth death.

Elvis Dzvene is a final year Undergraduate Student studying Bachelor in Commerce Banking & Finance Honors Degree who write Articles on his own capacity. Can be contacted at +263775897093/

Source - Elvis Dzvene
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