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200 firms to blame for cash shortages, says Mangudya

Staff Writer

Reserve Bank of Zimbabwe governor John Mangudya has said half of the money in the formal banking system is owned by 200 firms, a development he said was weakening the value of the local currency on the parallel market.

This week the Zimbabwe dollar traded at 29:1 against the United States dollar as confidence in the domestic currency wanes.

Presenting his first Monetary Policy Statement for the year, Mangudya on Monday said the entities were engaged in rent-seeking behaviour that has resulted in the manipulation of the local currency as well as cause foreign currency shortages.

READ: MONETARY POLICY STATEMENT PRESENTATION LIVE TWEETS

Official figures obtained from the central bank show that the level of liquidity or money supply in the economy as measured by total banks’ deposits stood at ZW$34.5 billion as at 31 December 2019, composed of ZW$22.0 billion (64%) in local currency and ZW$12.5 billion (US$785 million) or 36% in foreign currency.

“Focusing on liquidity management becomes even more critical especially in the context under which around 50% of this ZW$34.5 billion is concentrated on only 200 entities whilst the majority of the Zimbabwean population is struggling to make ends meet in an economy with a huge output gap,” Mangudya said.

“The Bank shall set aside appropriate foreign exchange resources to intervene and stabilize the market, as may be required once the enhanced interbank foreign exchange market becomes operational.”

Despite a growing trend by individuals and business to re-dollarise, the RBZ chief said the use of the local currency for transacting purposes has also continued to go up, reaching a total amount of ZW$459.6 billion from 189 million transactions for the full year 2019.

Turning to the legacy debt that was accrued after the government abandoned the multicurrency system for the exclusive use of the Zimbabwe dollar, Mangudya said the RBZ has validated a total of US$1.2 billion debt owed to foreign suppliers. Nealy US$861m has been stuck off for lacking supporting documentation.

“To date, Exchange Control has processed and validated blocked funds in an amount of US$1.2 billion from 730 applications out of 1080 requests. Of those processed, 299 transactions with a value of US$861 million were rejected for various reasons ranging from double-dipping to lack of supporting documentation. The balance of 350 transactions with a value of US$457 million are being processed for finalisation by 29 February 2020,” Mangudya said.

The validated blocked funds, he said excluded the legacy foreign exchange obligations of US$361 million under the RBZ Debt Assumption Act.

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Daniel Chigundu

Daniel Chigundu is the news editor for OpenParlyZW an online platform that covers Parliament of Zimbabwe activities using social media (Twitter and Facebook). He is currently the secretary-general of the Zimbabwe Parliamentary Journalists Forum and a board member of Digital Communication Network.

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