ZW$18bn stimulus package inadequate

THE ZW$18 billion stimulus package unveiled recently by government to mitigate against the impact of Covid-19 is inadequate for the resuscitation of business operations, the Employers’ Confederation of Zimbabwe (Emcoz) says.

Kudzai Kuwaza

The stimulus package was announced by President Emmerson Mnangagwa to assist all productive sectors to get the funding needed to revive their operations and retain jobs. It was designed to mitigate the effects of the Covid-19 pandemic, which has resulted in hundreds of thousands of fatalities globally, while also helping business following loses from the resultant national lockdown which was imposed by government on March 30.

The ZW$18 billion stimulus package consists of agriculture support (ZW$6,08 billion), Working Capital Fund (ZW$3,02 billion), Mining Sector Fund (ZW$1 billion), SME Support Fund (ZW$500 million), Arts Sector Fund (ZW$20 million),

Liquidity Release from Statutory Reserves (ZW$2 billion), Health Sector Support Fund (ZW$1 billion), Broad Relief Measures (ZW$1,50 billion) and Food Grant (ZW$2,40 billion).

In a wide-ranging interview this week, Emcoz president Israel Murefu said the stimulus package will not fully address the needs of industry.
“As a result of the effects of Covid-19, we need a much bigger stimulus package than the ZW$18 billion. Even that ZW$18 billion itself is not in the form of cash,” he said.

“A significant portion is in the form of guarantees which means the liquidity required to lend has to come from somewhere and presumably the banks .The banks have their own risk management criteria which they may not be able to relax because their money comes from depositors and so they have to protect depositors funds by applying good risk management criteria which some businesses may struggle to satisfy. I think we need much more concessionary funding to support bank lending to the business sector, so that businesses may be able to recover.”

Murefu warned that without adequate resources to provide to businesses at low rates of interest, recovery will be “painstakingly long”.The Emcoz president pointed out that the country is moving towards dollarisation with government availing Covid-19 allowances of US$75 and US$30 for civil servants and pensioners respectively last week.

“I think, as a matter of fact, what is obtaining is de facto dollarisation, but de jure (as a matter of law), we are still in local currency. We are slowly but surely gravitating towards dollarisation,” Murefu said.

“The pronouncements by the authorities have always been paradoxical in that each time they move towards dollarising, they deny it and as they intensify dollarisation manoeuvres, they also vehemently deny it. Well, seeing is believing. While the accounting currency remains the Zimbabwean dollar, the reality on the ground is that the US dollar is fast and surely becoming the transacting currency. Where it is not the transacting currency, the pricing mechanism is premised on the US dollar; that is still dollarisation.”

He said the dollarisation process will be slowed down by the small amount of United States dollars currently in circulation, with most of the forex either kept in foreign currency accounts or by individuals in their houses as an asset of value preservation rather than a currency for transacting purposes.
“My view is that as a nation we are gravitating towards dollarisation and it is probably a question of time before we see full dollarisation,” Murefu said.

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