THE Zimbabwe Stock Exchange (ZSE) – a barometer of the economy’s health – showed this week the crisis continues to deteriorate despite official claims to the contrary.
Zimbabwe Independent Comment
The market on Wednesday fell a further 1,77% to close the day at a total market capitalisation of US$2,7 billion.
The Industrial Index dropped 1,49% to 93,66 weighed down by losses in Delta and Econet of 2,88% and 6,65% respectively. The market slumped further yesterday to close at US$2,6 billion weighed down by weaker trades by Econet, BAT, Innscor and other big counters.
The industrial index on Wednesday plunged to its lowest levels in seven years, all but confirming an economic slide underlined by the liquidity crunch, cash shortages, weak aggregate demand, massive company closures and job losses.
By the close of trading the main industrials index was at 95,08 points, a level last seen in April 2009 just after the adoption of the multicurrency regime which restored macroeconomic stability until late 2013.
The ZSE’s current level is 59,22% lower than the peak of 233,18 points recorded in 2013 towards the end of the inclusive government.
The latest statistics paint a gloomy picture of the situation.
This is contrary to assertions by Chief Secretary to the President and Cabinet Misheck Sibanda, now a central figure in the management of the economy, who recently ridiculously claimed the economy was recovering despite clear evidence it’s not.
The economy has been going down since the beginning of the year, having been deteriorating from 2013 when the multicurrency-driven macroeconomic stability and rebound ended.
The ZSE market capitalisation plunged to US$3 billion as at December 31 2015 from US$4,3 billion in January the same year.
Since then economic crisis has deepened. El Nino-induced drought and erratic weather patterns have hit agricultural output hard, disrupted hydropower production and water supplies. Economic activity is grounded by tight liquidity conditions, resulting from limited external inflows and lower commodity prices in the global markets.
Deflation persists. This is attributable to the appreciating US dollar — the country’s main currency — and lower commodity prices. The strength of the dollar is making Zimbabwe more uncompetitive and thus hurting exports. This in turns worsens the liquidity crisis. The trade or current account deficit inevitably remains high, hence weak balance-of-payments position.
Besides, Zimbabwe remains in debt trap; its reserves badly low.
Despite disjointed efforts by government to improve the ease of doing business, investors are still kept at bay by policy inconsistencies and uncertainty, as well as the toxic indigenisation laws.
The recent announcement of the advent of bond notes by monetary authorities has exacerbated the already bad situation, triggering a run on banks, panicky externalisation of funds and capital flight – further bankrupting the economy.
Yet political uncertainty, policy disarray, currency speculation and weak commodity prices pose a serious risk to the already battered economy.