The Sunday Mail
Busisa Moyo —
Bond notes have been met with mixed reactions but business has started to handle and transact with them, albeit in a small way.
The concern is that circulation has been low, bank queues are persisting and the notes may not be enough to alleviate the problem of access to cash. The liquidity crunch has only been alleviated to a small extent as bond notes are being “drip fed” into the economy to build confidence and prevent inflation.
The country will have to continue with plastic money usage and cellular payment platforms. More and more companies will have to use these transaction methods along with bond notes, RTGS and multi-currencies in the form of the rand, United States dollar and the euro.
Exporters are receiving a five percent incentive that will allow them to lower prices in export markets and increase sales volumes. Exporters, especially those of manufactured or value-added products, need a 15-20 percent incentive to be viable.
Industry is receiving very small amounts of bond notes at present as retailers have been collecting payments in the notes for five days, we are likely to see an increase in the next coming days.
It will be important for the monetary authorities to stick to the script and messages around bond notes so that the public has confidence in the bond notes.
This should also ensure the notes serve the purpose for which they were intended, not speculative purposes which could spark off a series of events that will be difficult to manage and control.
The country has four economic challenges at present:
- The debt overhang where the country owes US$10 billion to multi-lateral creditors and US$5 billion to domestic creditors. A credible and time-bound plan is required to resolve the debt situation so that the economy can start moving forward.
- Lack of fiscal space or the fiscal deficit. Government will have to employ tactics of austerity and aggressively cut back on expenditure as this will also reduce the increase of borrowings and crowding out of the private sector.
The size and cost of the public sector needs to be rebalanced to the size of revenue inflows. Salaries have to be capped at 50-60 percent of revenues.
There may be need to prune unviable parastatals in a rapid privatisation and commercialisation programme and some parastatals being sold to become stand-alone entities that can attract private investors and lenders based on commercial terms.
- The trading account deficit. The country imports US$3 billion more than it exports, and this is fuelling liquidity challenges and depleting Nostro balances, crowding out essential imports such as fuel and energy and this could cripple the economy if unabated and shortages could start to appear.
The liquidity challenge. The liquidity challenge manifests itself in two ways:
Companies being unable to pay foreign supplies due to low Nostro balances and secondly, a shortage of notes and coins to support trading activities in the multi-currency system.
The Government has to comprehensively address all these fundamentals and rebuild confidence in the economy as a matter of urgency.
Mr Busisa Moyo is the Confederation of Zimbabwe Industries president, and wrote this article for The Sunday Mail.
