Former Governor of the Reserve Bank of Zimbabwe (RBZ), Dr Gideon Gono spoke about the liquidity challenges facing the country during the Zimbabwe Investment Conference in Harare yesterday. Liquidity means how quick one is able to access cash and Zimbabweans are facing challenges to get money into the tips of their fingers.
The Former Governor said that liquidity has been misunderstood and as a result, people go looking to lay blame on wrong doors.
“We need to understand the primary source of liquidity. The primary source of liquidity in a dollarised economy such as this (in Zimbabwe) is exports because we don’t print the (US) dollar,” Gono said.
Exports bring in the most needed Foreign Currency into the country thereby increasing the amount of money that can circulate in the Zimbabwean Economy.
Besides exporting, Gono also said that the other source of liquidity is Foreign Direct Investment (FDI), which has been low in Zimbabwe. When investors come into the country to invest they bring in foreign currency which is needed for liquidity.
Gono also spoke of the money remitted by the diaspora as another source of liquidity in Zimbabwe.
“The other source of liquidity is to make sure that imports are better than exports…in this case (of Zimbabwe) imports are competing with exports,” Gono went on to say.
The former governor said that there is need to use import substitutions in the country as well as promoting Zimbabweans rather than importing goods that the country already has such as bottled water.
Liquidity challenges which Gono was addressing about started in 2016 and the RBZ responded by introducing the bond notes which seem to have failed in resolving the crisis as Zimbabweans continue to queue for cash.
Zimbabwe has in the past witnessed a Trade Deficit of $1,56 billion as imports ($4,47 billion) exceeded exports ($2,91 billion) in the first 10 months of 2017, which implies that Zimbabwe is losing more money through importing.
The country, that is calling investors for economic recovery has also been getting limited FDI in the past due to sanctions.
Current RBZ Governor Dr John Mangudya is encouraging the use of plastic money to counter liquidity challenges and has offered Exporters who bring in foreign currency in the country incentives.
Zimbabwe has been getting foreign currency through diaspora remittances which have been averaging US$1 billion for the past three years.
The other producers of foreign currency in the country also include tobacco in Agriculture and minerals such as gold in the Mining Sector.
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