Zimbabwe now back to 2008 doom

Zimbabwe now back to 2008 doom
Published: 24 September 2017 (180 Views)
Experts have issued a fresh warning that the country is now a touch away from an economic disaster similar to the meltdown of 2008 when local inflation hit world record levels and supermarket shelves went empty for months on end.

This comes as there is growing panic among jittery Zimbabweans who are stampeding to hoard basic consumer goods in light of the country's worsening foreign currency shortages and the resurfacing of long fuel queues at most service stations.

In the meantime, the under-pressure Reserve Bank of Zimbabwe (RBZ) has called for calm, saying reports of shortages of both bond notes and basic goods are exaggerated — even as many shops in urban areas at the weekend did not have adequate supplies of sugar, cooking oil and washing powder.

Economic experts who spoke to the Daily News on Sunday yesterday said they had little doubt that the country was now headed for the "doom and gloom" of 2008 when Zimbabwe experienced unprecedented socio-economic problems characterised by shortages of fuel, basic foodstuffs and drugs.

They pointed to the burgeoning parallel forex market, the complete disappearance of the much coveted United States dollar, the collapse of bond notes and the skyrocketing prices of most consumer goods as "grave indicators" of a tough road ahead.

However, and against the experience of ordinary Zimbabweans on the ground, RBZ governor John Mangudya appealed for calm, also dismissing reports of shortages of basic commodities.

"The Reserve Bank of Zimbabwe would like to advise the Zimbabwean public to dismiss the social media messages that are circulating and suggesting that there is going to be a shortage of basic commodities.

"These messages are meant to cause panic and despondency and mayhem to the unsuspecting and peace loving members of the public. All such and other statements should be dismissed with the contempt they deserve," Mangudya said in a statement.

"Peddling of such fake news is quite unfortunate. There are no shortages of basic commodities. On the contrary, foreign exchange currently being allocated for basic and essential commodities has instead been increased to ensure that shortages of commodities do not occur within the economy.

"Zimbabweans should refuse to be hoodwinked by fake social media statements designed to increase premiums on the parallel markets by misguided rent seekers.

"In addition, the minister of Finance and Economic Development did not print bond notes to buy US dollars from the streets.

"Such malicious statements are counter-productive and are meant to sabotage the economy that is on the rebound on account of the good agricultural out-turn, strong performance of the mining sector and the recovery of the manufacturing sector," Mangudya added.

This hard-hitting central bank statement notwithstanding, most service stations in Harare were dry yesterday — and where fuel was available, there were long queues as motorists rushed there to fill up their vehicles.

Similarly, local pharmacies are also struggling to stock critical drugs due to the biting foreign currency challenges in the country, forcing them to also hike the prices of essential medicines.

Zimbabwe is relying on foreign imports for its much-needed drugs, medicare equipment and other hospital consumables. It imports more than $400 million worth of basic drugs each year.

At the same time, the RBZ says it has a backlog of $600 million on its imports bill books, although analysts say the correct figure is closer to $1 billion.

Apart from failing to access foreign currency at local banks, ordinary Zimbabweans have over the past few weeks been greeted by sharp increases in the prices of basic goods, as retailers hike prices continually in response to the high cost of money on the parallel market.

Yesterday, one US dollar was trading against the bond note at up to 1,40 on the parallel market, while bank transfers were being transacted at 1,60 bond notes for one greenback.

The majority of companies which fall outside the RBZ's priority list for foreign currency rely on bank transfers for their needs, via the parallel market.

As a result, prices of basic consumer goods have been shooting up sharply as companies and retailers pass on their exchange costs to ordinary Zimbabweans.

"There has been a surge in prices of most goods owing to the cost of money on the parallel market. Most manufacturers and importers are resorting to the illegal market for foreign payments for raw materials and other critical goods.

"The high cash premiums are causing serious price distortions on the market. This is hurting the economy and consumers . . . as business is simply passing on the cost of money to customers," Confederation of Zimbabwe Retailers president Denford Mutashu told our sister paper, the Daily News recently.

Many companies, including those on the authorities' priority list which import raw materials, have almost given up on the RBZ route as approvals of their foreign currency applications are taking long to bear fruit.

Zimbabwe is currently in the grip of a serious economic crisis which has resulted in severe cash shortages and the complete disappearance of US dollars from the formal market.

"That Zimbabwe is still using the United States dollar as currency is pure fiction. Zimbabwe abandoned the US dollar as currency way back in 2013 after the elections. The government did it nicodemously when we all weren't looking.

"This was partly driven by greed, partly by Zanu-PF's cluelessness and partly by the party's perpetual electoral mode — it campaigns more than it governs.

"What does this all mean? It simply means that we are back on the same road as we were from 2006 to 2008. The ghosts of shortages and inflation are creeping in," economic analyst Matt Matigari said.

"All Mangudya and his principals can do is just patch holes ... That my friends, is what we are facing. There is no point in sugarcoating reality because there is no Sugar Candy Mountain anywhere near.

"(President) Robert Mugabe is the only president with the unique distinction of battering two different currencies in his lifetime and within a space of 15 years. He did not just ruin the Zimbabwe dollar, but also tore apart the United States dollar as we knew it from 2009 to 2013.

"The present government has proven, not once, but twice that they are clueless and cannot address the fundamentals. In its current configuration, the government will never change our trajectory. Serious inflation is coming and so are all the problems we have experienced before," Matigari added.

Former Finance minister Tendai Biti, who was credited with steering the economy from the danger zone shortly after the formation of the inclusive government in 2009, warned of worse things to come.

"The wheels have come off completely and the irony is that we are in a recession with inflationary tendencies and this is a sign of failure on the party of government," he said.

- dailynews

Tags: Zimbabwe, 2008, doom,
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