'Zimbabwe heading towards de-dollarisation'

'Zimbabwe heading towards de-dollarisation'
Published: 04 September 2017 (685 Views)
THE central bank's decision to more than double the size of its bond-note programme to $500 million confirms the country is headed towards de jure de-dollarisation, which threatens to accelerate inflation, an international research body has said.

Dollarisation has two forms, namely, official/de jure and unofficial/de facto. BMI Research found that an increase in bond notes was actually de-dollarising the economy.

BMI Research warned last week that increasing money supply would contribute to an accelerated growth of inflation from 1,4% by year-end to 8,5% in 2018 - making the steepest growth since 2009.

"The Reserve Bank of Zimbabwe's (RBZ) decision to more than double the size of its bond-note programme - to $500m from $200m previously - confirms our view that the country is headed towards de jure de-dollarisation," it said.

It said the Zimbabwean economy was not returning to a prolonged period of disinflation recorded between October 2014 and January 2017 despite falling inflation in recent months.

"Instead we expect inflation will reach 1,4% by year-end 2017, before accelerating to 8,5% in 2018. This would make the steepest acceleration in price growth since the days of hyperinflation prior to dollarisation in 2009, but is a reflection of the impact we expect from a combination of increasing domestic money supply and growing shortages of imports as hard currency becomes increasingly scarce."

Economists and the International Monetary Fund say the continued growth of the parallel market is what would threaten an increase in inflation if left unchecked.

As businesses, retailers, bankers and individuals, among others head to the parallel market for hard currency - sourcing it out at premiums of between 15% and 25% - the aggregate effect would most likely be an increase in the prices of goods.

"The effect will be compounded by the likelihood of shortages of imported goods as the supply of hard currency with which to access foreign goods continues to fall," BMI Research said.

"Although the country is likely to benefit from an increase in tobacco production and gold prices over our short-term outlook, we do not believe this will be sufficient to restore the supply of hard currency in the economy to the point where businesses and households are no longer struggling with a lack of dollar liquidity."

"As such, with the stock of hard currency failing to meet the economy's demand for liquidity, we believe the RBZ will have little choice, but to accelerate its bond note programme, boosting money supply in the economy."

- newsday

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

WATCH: 'Obert Mpofu demanded a $10m bribe'

by Staff reporter | 22 February 2018 | 35 Views

Tsvangirai's second book to be published soon

by Staff reporter | 22 February 2018 | 29 Views

Student grants back

by Staff reporter | 22 February 2018 | 39 Views

Professor Dlodlo appointed NUST vice chancellor

by Staff reporter | 22 February 2018 | 42 Views

'Tsvangirai's funeral number two in Africa to be largely attended'

by Stephen Jakes | 22 February 2018 | 88 Views

MDC-T president Nelson Chamisa must denounce political violence

by Leonard Koni | 22 February 2018 | 57 Views

MDC-T Zhombe defends Chamisa over violence

by Stephen Jakes | 22 February 2018 | 114 Views

Plot to unleash violence backfires

by Stephen Jakes | 22 February 2018 | 74 Views

Grace Mugabe's PhD supervisor investigated

by Staff reporter | 22 February 2018 | 54 Views

Thanksgiving to Everyone who burial of Tsvangirai

by Richard M Simango | 22 February 2018 | 55 Views

Nadia Nakai no-make-up challenge goes viral

by Staff reporter | 22 February 2018 | 63 Views

Soldier loses service pistol in nightclub

by Staff reporter | 22 February 2018 | 121 Views

A befitting 'violent' farewell to an iconic boss

by Luke Tamborinyoka | 22 February 2018 | 103 Views

Zimra aim to enhance efficiency

by Staff reporter | 22 February 2018 | 56 Views

Floods wreak havoc

by Staff reporter | 22 February 2018 | 83 Views

Mnangagwa to address war vets' grievances

by Staff reporter | 22 February 2018 | 78 Views

Tsvangirai wanted passport for prophetic healing

by Staff reporter | 22 February 2018 | 112 Views

Gutu quits 'violent' MDC-Chamisa

by Staff reporter | 22 February 2018 | 81 Views

'Mnangagwa a tried, tested leader,' claims Mohadi

by Staff reporter | 22 February 2018 | 58 Views

Zanu-PF MP's son, girlfriend caught up in cops and robbers shootout

by Staff reporter | 22 February 2018 | 146 Views

Man strikes fellow villager with axe over cigarette

by Staff reporter | 22 February 2018 | 59 Views

Zesa builds $7,5m plant for Beitbridge

by Staff reporter | 22 February 2018 | 41 Views

TM to pay fired line managers

by Staff reporter | 22 February 2018 | 75 Views

Warrant of arrest for bribe cop

by Staff reporter | 22 February 2018 | 45 Views

Aspiring nurses sue Parirenyatwa over training

by Staff reporter | 22 February 2018 | 54 Views

Doctors give govt 21-day ultimatum

by Staff reporter | 22 February 2018 | 46 Views

Mnangagwa receives railway equipment from SA

by Staff reporter | 22 February 2018 | 74 Views

Angolans too strong for FC Platinum

by Staff reporter | 22 February 2018 | 60 Views

Mai Chisamba to record two episodes in Bulawayo

by Staff reporter | 22 February 2018 | 56 Views

NRZ set to make $1.1 million monthly

by Staff reporter | 22 February 2018 | 53 Views

Mnangagwa presses Joram Gumbo over Chirundu-Beitbridge road dualisation

by Staff reporter | 22 February 2018 | 60 Views

ICC team inspects Bulawayo venues

by Staff reporter | 22 February 2018 | 48 Views

Tsvangirai burial was never going to be complete without violence

by Staff reporter | 22 February 2018 | 96 Views

'Chamisa sent thugs to kill me'

by Staff reporter | 22 February 2018 | 157 Views

Obert Mpofu urges people to stop insulting each other

by Staff reporter | 22 February 2018 | 29 Views

AMC car plant in the pipeline

by Staff reporter | 22 February 2018 | 36 Views