It is becoming increasingly clear that the cash crisis besetting Zimbabwe won’t be going away and, worse, the government’s normally successful strategy of turning a blind eye to national crises is failing. Zimbabwe’s crippling cash shortage has left a black hole in the financial system that’s crushing the rest of the economy.
Opinion: Learnmore Zuze
The Zimbabwean government has always done it with startling success; it can ignore a pressing crisis until the people’s groans are turned into aggrieved silence.
This is one reason why at the height of the popcorn protests last year, it was apparent that there was simmering anger in Zimbabweans. They are tired of a “there is no crisis in Zimbabwe” approach while they live with hell daily.
Zimbabweans, through various groups, have called for a number of things which have been “successfully” ignored by the government.
A case in point is the call for electoral reforms which has been brazenly disregarded. Even further, seven years on, the government is yet to append its signature to the African National Charter on electoral reforms. The hope is that this call dies a natural death as we approach 2018.
The abductions so rampant and police brutality constitute other things that the government has managed to get away with despite spirited protests.
The list is endless; the numerous roadblocks also being another example of how the government survives through the principle of ignoring crises.
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However, there is one crisis that is proving to be in a category of its own. It has been with us since the introduction of the resented bond notes. In fact, the introduction of the bond notes was the culmination of a crisis that had begun way back.
The Zimbabwean economy is devoid of production. There is no productivity, hence the United States dollars in circulation had hit critical lows resulting in the hesitant pouring-in of the surrogate currency.
It was apparent they were unsure of the effect of the notes; the government itself moved in a chameleonic manner towards introduction of the despised bond notes. It remained headstrong despite sound advice from economics experts.
Despite, at one time, the bond notes being celebrated for holding their own against the strong US dollar, the final truth is what lies before us today: The bond notes were never going to ease the cash crisis. In fact, the queues have become longer.
The cash crisis has become more defined. The bond notes have actually added to the crisis because theoretically people have money, but in essence they have nothing.
Businesses are hardest hit, bank balances indicate the money is there, but it isn’t there. Business can make payments electronically to local suppliers, but they can’t pay foreign suppliers.
There is no clearcut understanding of the kind of money that one has in electronic form: Is it the US dollar or the bond notes? Companies have been thrown into the deep end.
The liquidity squeeze has left companies unable to pay their workers in cash and foreign suppliers, driving many out of business, and added to the ranks of more than three million people who have become economic exiles. The economy probably shrank 0,3% last year and is set to contract 2,5% this year, according to the International Monetary Fund.
The problem, as aforementioned, with the government is that they seek, at all costs, to paint a glorious picture of the economy yet reality on the ground shows otherwise. We can all see the failure of the bond notes.
While banks and most large retailers accept the proxy currency, many small stores, informal traders and taxi drivers won’t, or price them at as little as 70% of their dollar face value.
Everyone who visits Zimbabwe can see the unrelenting cash crisis and the sooner the government gives this problem the due attention it deserves, the better for the country. This is one crisis that cannot be ignored. It is in a class of its own.
People have to transact with money. Business uses money daily. Productive hours are being lost in queues. The country, it’s clear, has run out of money and has completely lost the ability to pay for imports.
This is worsened as it comes against a backdrop of falling productivity as companies fail to access vital inputs because there’s no foreign currency to pay for them.
As economists have noted several times, as long as government continues to do things that discourage both local and foreign investment into the productive sector, the situation can only get worse.
Just before the introduction of the bond notes, it was a given explicitly stated by many that there was no way the surrogate currency could stand neck and neck with the American currency.
More bond notes will only add fuel to the demand for hoarding of what is viewed as being the superior currency and store of value in Zimbabwe: the US dollar. What remains sad is that there is no one to take heed of this priceless economic advice. The good thing, though, as I have highlighted, is that this (cash) crisis is one that cannot be ignored. It can only be ignored at the government’s own peril.