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NewsDay

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Pragmatic solutions needed to avert cash crisis

Opinion & Analysis
Since the beginning of dollarisation, Zimbabwe has not faced a cash crisis like the one that is looming now and if the government does not act quickly enough, this will have a devastating effect on the economy.

Since the beginning of dollarisation, Zimbabwe has not faced a cash crisis like the one that is looming now and if the government does not act quickly enough, this will have a devastating effect on the economy.

NewsDay Comment

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For weeks now, some banks have reduced the maximum daily withdrawal to $500 and others to as little as $200.

The situation is likely to worsen in the next few weeks, when the government pays some civil servants their belated bonuses, with queues at banks likely to resurface, as some of the financial institutions will certainly run out of money, as happened when police officers received their 13th cheque.

The Reserve Bank of Zimbabwe has already hinted it will import $200 million to avert the crisis. While this is welcome, it is a piecemeal solution.

What is needed now is a comprehensive relook at our monetary policy, as it could be the cause of some of our problems.

The US dollar has served us well, but at this point it is becoming an albatross around Zimbabwe’s economic neck.

With the fall in global commodity prices, particularly oil, investors choose to keep their money in US dollars, meaning the American greenback will continue to strengthen against currencies like the rand.

This means goods in South Africa will become cheaper and more attractive to Zimbabweans and the $200 million that is being imported will soon be carted out of Zimbabwe again to feed our consumption appetite.

The adoption of the South African rand is a no-brainer, but pride together with a misplaced sense of patriotism and exceptionalism stand in the way.

The rand may have wobbled in recent times, but it is a stable currency, which may best serve our situation, rather than clinging onto the US dollar that is hastening our economic downfall.

On a related note, the central bank governor, John Mangudya, like Gideon Gono before him, has advocated for the use of plastic money to avert cash shortages.

This sounds like a noble plan until it is scrutinised. Using plastic money is more expensive than using cash and Zimbabweans will continue shunning such transactions.

ZimSwitch is a noble platform, but ATM charges are seriously prohibitive, while Visa and MasterCard transaction fees are out of the reach of the majority.

If the government wants Zimbabweans to adopt plastic money, then they have to do their bit by reducing transaction costs, because, as long as these stay, then plastic money will always be a pipedream.

It is not that Zimbabweans are resisting plastic money, but the costs are ridiculous and not beneficial to anyone.

Zimbabwe’s problems are literally of our own making and authorities seem to concentrate on treating the symptoms rather than the cause.

Pragmatic solutions are needed to solve the country’s problems, but so far, all we see are short-term solutions, which in the long run will not help matters in any way.