‘Resolve currency problem’




Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) executive director, Caleb Fundanga has said Zimbabwe must make a clear and final decision on the currency in use to halt the prevailing liquidity crisis in the country.

BY FIDELITY MHLANGA

Speaking at the 2017 Zimbabwe Independent Quoted Companies Survey on Wednesday, Fundanga told delegates that with the currency problems, the government should deal with deep-
seated structural challenges in the economy.

“Given the fast-changing economic environment, it is critical that the government of Zimbabwe makes a clear and final decision on how to proceed regarding the currency options, a deeper dialogue on currency options has to be opened,” he said.

“Government needs to make a bold decision by pronouncing the optimal policy choice, given the alternative options that have come out of dialogues so far.”

Fundanga said the decision taken should be able to halt the currency crisis and proposed closer engagement with the Zimbabwe’s Diaspora community, as they were critical in investing.

“For the currency option to be agreed on, there should be national consensus by all key stakeholders as to how to move forward,” he said.

“It is, however, important to emphasise that if the currency option chosen is to succeed, it should be accompanied by strong fiscal discipline.”

Fundanga said since the introduction of bond notes, the economy now faced new challenges, as the United States dollars had also become scarce, resulting in stringent daily bank withdrawal limits.

“Currency deposits have also dwindled,” he said.

“The use of plastic money has increased significantly, but some amount of cash is still required for transacting in the informal sector where plastic money devices are not available.

“Traders are finding it difficult to get customers due to cash shortages.

“Parallel market trading in currencies has come back, with bond notes trading at a discount of 14 to 20% per $100.”

The advent of bond notes has bred a three-tier market pricing system, with different prices for US dollars, bond notes and the use of bank cards.

“The current era of bond notes presents more serious policy challenges,” Fundanga said.

“To a larger extent, the current cash shortages reflect deep-seated structural challenges in the real economy, which policymakers are seized with.”

The former Reserve Bank of Zambia governor said a number of policy reforms they have suggested over the years have not been fully implemented.

“From a policy perspective, it is critical that the policy agenda promulgated in the key policy blueprints, which include Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) is implemented in full,” he said.

“A number of policy reforms that have been put forward over the years have not been fully implemented.

“Some have been overtaken by events in the fast-changing environment. As a result, some of the ZimAsset targets such as the annual economic growth rate of 7,3% now seem unattainable.” – NewsDay