HomePoliticsGovt's proposals on cash crisis flawed - analysts

Govt’s proposals on cash crisis flawed – analysts

Dumisani Muleya

GOVERNMENT’S proposed measures to alleviate the deepening cash crisis will not work as they are based on a flawed understanding of the issue, analysts have said.

T face=”Verdana, Arial, Helvetica, sans-serif”>Authorities on Tuesday announced a raft of austerity measures to ease the crisis against a backdrop of rising tension over cash shortage.

These included the phasing out in the next 60 days of the $500 note, currently the highest denomination, and the introduction of a similar bank note but with a different colour and features.

They also said government would introduce $1 000 bills to deal with the shortage of paper money.

Finance minister Murerwa claimed he was stepping up efforts to address money shortage caused by government’s failure to print enough bank notes in line with skyrocketing inflation.

Murerwa said government would from August 8 ban people from taking local money outside the country. Currently people are allowed to take outside $50 000 each.

He said the Reserve Bank of Zimbabwe would introduce travellers’ cheques to reduce demand for cash.

Banks would be required to account in full for cash collected from the central bank and deposits from the public. Institutions that defy these measures would be punished. Government would force retailers and wholesalers to deposit their money with banks as soon as possible and also account for their own cash.

However, University of Zimbabwe analyst Professor Tony Hawkins said in an interview these fire-fighting measures would not resolve the problem. He said if anything, they would fuel inflation which is currently 364,5%.

“It’s all nonsense,” Hawkins said. “It’s just another sign of a collapsing government. Zanu PF has no serious economic policies except the usual ad hoc measures and playing the blame game.”

Hawkins said it would take up to a year to replace the current $500 notes and not two months as the minister seems to think.

“We have reached a stage where we can’t change the economic situation without changing government,” he said. “I have always been saying this.”

President Robert Mugabe also appointed a cabinet taskforce chaired by Murerwa to tackle the cash crisis.

The opposition Movement for Democratic Change (MDC) said the cash crisis was further evidence of Mugabe’s incompetence.

“The unprecedented cash shortage epitomises Zanu PF’s policy failures,” MDC spokesman Paul Themba Nyathi said.

“People now have barely enough money to buy food and fuel, pay rent and service bills, and buy food for children. The cash crisis and the broader economic problems can only be resolved through the restoration of democratic legitimacy.”

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