Economy depressed over cash shortages

Meanwhile regional research unit NKC African Economics (NKC) says Zimbabwe’s worsening cash shortage has depressed aggregate demand in an economy that has not fully embraced the use of plastic money.

Staff writer.

The research unit said the envisaged introduction of bond notes has sent panic waves through the country and consumers rushed to get their money out of the banking system, exacerbating the cash shortage.

“Recently, banks reportedly approached the central bank for approval to slash the daily withdrawal limit of US$1 000 to a weekly withdrawal limit of US$500 as the cash crisis takes its toll,” said NKC.

“Furthermore, food and non-alcoholic beverages deflation continues to show no signs of easing, despite the worst drought in numerous years. Nonetheless, food price inflation is expected to commence as last year’s reserves and current harvests dwindle. As such, we expect a deceleration in headline deflation in the short term,” added NKC.

NJKC said Zimbabwe’s slight uptick in deflation in May follows the biggest drop in deflation since November 2015 in the previous month.

Zimbabwe’s headline deflation increased marginally to 1,69% year on year in May 2016, compared with 1,64% year on year on year the previous month, latest statistics from the Zimbabwe National Statistics Agency (ZimStat) show.

Zimstat said the food and non-alcoholic beverages deflation rate ticked higher to 4,13% year on year in May, compared with 4,02% year on year the previous month while the housing, water, gas and fuels deflation rate increased to 2,17% y-o-y in May, compared with 2,11% year on year the previous month. On a month on month basis, headline deflation increased to 0,24% in May, up from 0,21% the previous month.