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New exchange control dampens confidence

The Reserve Bank of Zimbabwe (RBZ) last week tightened exchange control regulations on locals earning foreign currency.

 The apex bank tightened regulations on withdrawals of foreign currency by Zimbabweans who earn their salaries in foreign currency. Zimbabwe’s economy is facing serious headwinds and what it needs now is protection of investment and policies that stimulate growth. Sadly that is not happening at the moment.

The latest decision by the central bank to tighten foreign currency withdrawals evokes yesteryear memories when the same bank raided foreign currency accounts of those earning the greenback. The Zimbabwe dollar has been on a free-fall and one of the missing ingredients in defending the value of the local unit is confidence.

Over the past few weeks, the central bank has announced several measures in its quest to reverse the devaluation. Those measures have not yielded much. The suspension of cash-ins and cash-outs on mobile money platforms and the reversal of this directive have cemented criticisms on Zimbabwe that her policies are inconsistent. That is not good for investment for an economy on the tails-end on the ease of doing business.

Zimbabwe, a net importer, is currently generating US$5 billion in exports annually and government is one of the biggest importers. At a time when hospitals are under stocked and fuel supplies remain erratic, government is splurging millions of dollars in importing state of the art vehicles for bureaucrats when the Willowvale Motor Industries is on the brink of collapse. That is but one area where the state is failing on its priorities.

For a country that reintroduced its domestic currency this year, after outlawing the use of the multicurrency system, confidence-building should be the central bank’s top priority.

At the height of the hyperinflationary era which peaked 231 million percent in 2008, Zimbabweans dumped new bank notes that were injected into the economy despite earlier efforts to rebase the currency. The reason for that was lack of confidence.

As pressure mounts for authorities to pump in new notes into the economy, the central bank should be mindful of the minefields that lie ahead when confidence is the missing link in the economy. Knee jerk reactions to structural deficiencies on the economy will not help much in stimulating the economy.

As Finance minister Mthuli Ncube and his team finalise the 2020 National Budget, the economy should take centre stage not politicking. Zimbabwe’s economy is on its knees contrary to the narrative been pushed and until and unless that becomes the starting point, this economy will continue to move in circles.

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