No Liquidity Crisis In Zim: Mangudya
Reserve Bank Of Zimbabwe Governor, Dr John Mangudya says contrary to public opinion, Zimbabwe has no liquidity crisis as there are enough Real Time Gross Settlements (RTGS), which are a true measure of a functioning economy.
Mangudya who was speaking at a handover ceremony of the central bank’s support facility to the Zimbabwe Tourism Authority (ZTA) in Harare on Friday, emphasized the need for production if the country is to produce more RTGs which in turn curb liquidity crunch.
He reiterated RBZ’s main passion which is to increase production and foreign exchange.
“We have too much money in this country in the form of RTGs, that is what measures liquidity. Do not measure liquidity by the money you withdraw from the banks, that is cash withdrawals.
“Liquidity is money in the bank that is idle and can be used at any time, that money is there and that is money we want to use to produce goods.
“Let us use the RTGs in the banks to produce goods thereby earning more exports which in turn bring more the much needed foreign currency ,which we already use, but we need more.The backbone of any economy in the world is money and the money comes from production.
“This is what we use when we measure our GDP (Gross Domestic Product), we ask ourselves what have we produced as a country,” said Mangudya.
He said the use of foreign currency as a domestic currency increases the country’s need for more Forex, which is however, not being produced enough due to limited production taking place in industries.
“The back rock of any economy is production, when there is no production then there is no money. It is important to instill a culture of production.
“However, in Zimbabwe we just expect to get money foreign currency, without meaningful production taking place. We need to sell a service for us to get the much needed foreign currency,” added Mangudya.
Zimbabwe’s foreign currency flow is usually at its peak between March and August due the tobacco selling season, which boosts Forex earnings.
However, the central bank gets 40% of total foreign currency earnings while the rest goes to banks.
Zimbabwe ditched its own hyperinflation-wrecked Zim dollar in 2009 in favor of the US dollar, but a combination of widening trade deficit, shortage of foreign investment and a sharp decline in remittances by Zimbabweans abroad have fuelled foreign currency shortages.
However, Mangudya said the country stands to benefit from the Tourism Industry in foreign currency earning.
“I challenge the tourism industry to contribute 10% to the country’s GDP by year end. We are at 5% at the moment and we need to double that which translates to $500 million of the country’s $5.5 billion total earnings for 2017,” said Mangudya.
The central bank Governor is on record claiming that there is no cash crisis in the country saying financial indiscipline was rife.
This is despite the long queues at banks countrywide.
A surrogate currency, the bond notes introduced in 2016 as an export incentive has not successfully addressed the biting cash crisis that has seen people sleeping at bank queues to withdraw their money.
On a positive note, the crisis has led to more people resorting to use of plastic money especially in the formal market but has created a thriving parallel forex market as the demand for the green back continues to force people to resort to alternative channels.