FINANCE minister Patrick Chinamasa has disclosed that cash deposits of $760 million are needed to solve the cash crisis currently bedevilling the country.
BY VENERANDA LANGA
Chinamasa told the Senate on Thursday that people continued to suffer at bank queues because of unscrupulous traders operating a parallel market.
He was responding to questions from Senators, who wanted to know when the withdrawal limits, that are currently at $100 per week, would be increased to ease the cash problems.
“Money is like blood that needs to circulate for any economy to survive and grow,” Chinamasa said.
“If money that is in the national economy, amounting to around $760 million (11,7% of total deposits), made up of $140 million of bond notes, $23 million bond coins and an estimated $600 million of multiple currencies, was circulating efficiently, there would be no cash shortages in the country.”
He said developed countries needed a range of 10 to 15% of deposits circulating in the economy.
“It is the traders and individuals, who are operating in the shadow economy that are, therefore, exacerbating cash shortages, while at the same time externalising cash and also feeding the parallel markets,” he said.
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“They do not pay taxes as well. They are abusing the privilege of operating in the reserved sectors of the economy.”
Zimbabwe has been facing acute cash shortages for the past two years, which worsened this year despite the introduction of a surrogate currency, bond notes, last year.
Chinamasa said the cash shortage in the country could be addressed by dealing holistically with the challenges of low production and productivity, fiscal deficit, current account deficit and market indiscipline.
“Fiscal deficit reflects that expenditure is larger than revenue. Excess expenditure over revenue causes cash shortages as it means reliance on overdraft to access the scarce foreign exchange. This is a double tragedy, which must be addressed,” he said.
Chinamasa said shortages of cash were not being caused by banks or the Reserve Bank of Zimbabwe.
“The shortage of cash is a symptom of a combination of structural challenges besetting the national economy, namely fiscal deficit, current account deficit, market indiscipline and low productivity,” he said.
“This situation is exacerbated by the current account deficit, which shows that Zimbabwe is a net importer.
“This requires foreign exchange to meet the excess imports over exports.
“The foreign currency shortage is further compounded by the glaring market indiscipline.”
