October 31, 2020

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Socio-Economic Crisis Deepens Amidst Covid-19

By Shingirai Vambe.

Zimbabwe – Barely three months after Covid-19 (C19) lockdown, the country is faced with deep economic challenges as the Central bank introduced two new higher denomination bond notes, ZWL 10 and ZWL 20 respectively.

Yesterday the Reserve Bank of Zimbabwe (RBZ), Governor John Mangudya said the Zimbabwean economy was demon possessed.
“There is a demon that is in this country which is causing economic instability, you can’t touch it, but you feel it, and we need your support as Members of Parliament to trace this demon” Mangudya said.

The central bank governor confessed he does not know the causes of the dying economy.

Economic analyst, John Robertson told post on Sunday that Zimbabwe had grossly lost a number of international market products which could bring in foreign currency into the market.

“Zimbabwe in 1980 used to produce a long list of mineral and agricultural commodities, efficiently enough to make profits from their sale abroad. We had even a longer list of consumer goods exports, which include clothing, footwear, furniture, stoves, texts and exercise books and processed meat,” he said.

Robertson added that these factories employed more than one hundred and eighty thousand people and sustained training schemes and apprenticeships sponsoring specialised facilities at the technical colleges.

He however highlighted that government’s interference in various business and parastatals caused a lot of cost increase adding to minimum wage and frequently adjusted while imposing additional taxes and new license fees.

He further highlighted where most of the economic challenges emanated from, citing the high import bill on food, every year since the land reform began, and the collapse in the country’s ability to earn foreign currency.

“Early 2009, Zimbabwe dollar was rendered valueless, and the coming in of the US dollar immediately arrested the hyperinflation and permitted the government to abandon many of its controls and regulations. But this did not go far as government then started to to manipulate US dollar values to suit Zanu Pf objectives, announcing extravagant public sector wage increases and introducing subsidies to generate hoped-for improvements in the very poor agricultural performance since land reform”.

Economist, Persistence Gwanyanya told this publication that the journey to dedollarisation had a false start.

“What this means to me is dedollarisation is not an event but a process. A country has to transit into dedollarisation, and we all know what happens in transition, and this is costly and unaffordable” he said.

 

RBZ a fortnight ago brought new bond notes into the market and citizens feel the country is heading towards the 2008-9 era where the local currency could not afford even to buy a sweet.

Comments passed on various social platforms, said the new high denominated notes cannot afford to buy even a loaf of bread which is being sold for ZWL 35.00.

Prices of goods and service have for the past three months of lockdown gone up, as the exchange rate in the parallel market continue to shoot, to the extent that even big supermarkets price commodities are not on USD 1:25 as regulated by the central bank.

For the past weeks fuel queues have resurfaced with various service stations wanting to sell the scarce commodity with the USD and having the rate at 1:60. This happened while most Zimbabwe in the informal market is still locked in due to C19 and they are wallowing with hunger and starvation.

Traders who spoke to Post On Sunday said they risk going out and trade illegally or against Covid regulations as they can no longer manage with prices of basic goods and food that has risen by more than 60% and security forces continue to chase people out of central business districts in various provinces.

Government has since advised the nation on the arrival of level two of the national lockdown, and business operators who are allowed to operate say the difference is the same, as the socio-economic situation of the country relies most on informal traders.
Economic analysts said the printing of the new high denominated bond note was not by coincidence but a came at an opportune time when farmers had just started auctioning their tobacco.

The RBZ spokesperson, Alson Mpiri however responded and said “Introducing new notes is dependent on the aspirations of the country and the economic fundamentals that include inflation and the level of financial inclusion”.

Contrary to previous target of using plastic money, the central bank said it was a substitution of money from electronic to physical cash and that should not affect exchange rates he further added the printing and introduction of new higher denomination notes is a gradual basis that takes account of economic fundamentals.