Govt must urgently resolve currency crisis

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Zimbabwe Currency Crisis

SINCE the turn of the new millennium, Zimbabwe has endured one economic crisis or another, the apex of which was a 500 billion percent inflation in December of 2008, according to World Bank data, which destroyed savings and rendered the local currency useless.

Another and equally devastating consequence was the closure of a record 5 600 firms between 2011 and 2013, which left 55 000 employees jobless. Around 10 firms were plunging into bankruptcy weekly, shading off an average of 300 formal jobs, according to reports from that time.

The dollarisation period of between 2009 and 2013 stabilised the economy somewhat, and the job letting eased because of currency stability and because consumer demand improved as well.

However, the return of the Zimdollar in 2019 has brought back familiar failings to the fore again and problems that confront the southern African country today stem from government’s decision to prematurely return the local currency before meeting several benchmarks, such as building three months import cover and improving exports.

Today, the same conditions that prevailed during the job bloodbath era have returned, and firms have been pushed to the brink.

Prices are rocketing daily, inflation has been rioting lately and the exchange rate crisis has spiralled out of control, eroding workers earnings at a frightening rate.

Exchange rate volatilities have become the biggest threat to consumers’ survival.

In the past five months, the value of earnings has fallen by about 40% and in addition, workers after receiving their Zimbabwe dollar salaries, have to buy United States dollars from the black market to fund their daily requirements such as transport, fuel, some groceries, rentals, school fees, among others.

These are issues that government has failed to tackle in the past three years, and as of this week, the situation has reached crisis point.

Interventions by government last week only worsened the situation, and showed a country without a coherent leadership, or at the very least, one that has no idea of how to handle the circumstances it is facing.

Government is picking fights with everyone: banks, manufacturing companies, transporters, commuters, everybody.

President Emmerson Mnangagwa has accused business of sabotage because they are not minded to follow his voodoo economics.

He fails to realise that the economy has been in currency cycles and these cycles have become vicious. Every aspect of the economy is in peril: savings, pension schemes, medical aid schemes and insurance covers — making planning for the future a nightmare for businesses and individuals.

Government must be careful that should it leave the problem to continue, companies will start effecting job cuts again.

Only about 1,4 million are in formal employment, compared to about 3,2 million in 1999.

The bulk of working-class citizens are in the informal sector, most of them not out of choice. But even in the informal sector, the going has been tough. The poor economy means few customers while the COVID-19 pandemic has increased poverty to unprecedented levels. Official data shows that over half of the country’s population is now classified as poor.

The situation is calling out for a proactive regime, not this slow, reactive apparition we seem to be saddled with.