By Oliver Kazunga
Zimbabwe needs about $800 million to circulate in the formal economy in order to end cash queues in banks, Reserve Bank of Zimbabwe (RBZ) Deputy Governor Dr Kupukile Mlambo has said.
Since April last year, Zimbabwe has been faced with cash shortages resulting in long bank queues and the RBZ has blamed the cash crisis on externalisation among other illicit dealings.
Speaking during a function organised by the Peace Messengers, a Seventh Day Adventist Church choral group in Bulawayo last Thursday evening where he was the Guest of Honour, Dr Mlambo said there was a mismatch between the country’s local US dollar account (RTGS account) and the foreign US dollar account (Nostro account).
He said this was reflected in the prevailing cash shortages.
“In Zimbabwe, with bank deposits of $6 billion we would need between $600 million and $800 million at any one time then all the queues will disappear. We need to be more productive as a country and increase our exports to generate more foreign currency,” he said.
About $400 million is circulating in the formal economy but due to biting cash shortages, the Central Bank has encouraged the transacting public to use plastic money and electronic payment systems such as RTGS and mobile money transfer platforms.
Dr Mlambo said RBZ has put in place a five percent export incentive to encourage exports.
“The tobacco sector is one of our biggest earners of foreign currency and as a country that does not have its own currency, our main source of currency is exports. We have put in place incentives to encourage the production of tobacco,” he said.
Dr Mlambo said the mining industry was also doing well in revenue generation.
“Principally, gold, platinum and chrome have done well. But the diamond sector has not done as we had expected. They are also our main sources of exports, so today almost 80 percent of our revenue is coming from four commodities.
“Now the challenge that we face is that the tobacco season starts in February and ends in August; between September and February we are only relying on three products for foreign currency earnings and that is why you find that towards Christmas there are even longer queues than you find during the year,” said Dr Mlambo adding that in December there was a lot of demand for foreign currency because of increased imports for Christmas.
In light of the projected 3.7 percent economic growth for this year premised on the expected bumper harvest, the positive growth trajectory was sustainable only if Zimbabwe addresses the prevailing challenges facing the economy.
“The country needs to address three main challenges if we are to sustain economic recovery. One is a largely domestically financed fiscal deficit, the second one is a large consumption led external deficit, and the third one is a huge confidence deficit,” Dr Mlambo said. The Chronicle