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Delegates follow proceedings during the Zimbabwe International Trade Fair International Business Conference in Bulawayo yesterday

Prosper Ndlovu, Business Editor
THE solution to the biting cash shortages in Zimbabwe lies in increased production and exports, which cannot be substituted by adopting the rand, the Reserve Bank of Zimbabwe (RBZ) said.

Responding to concerns over acute cash shortages in the banks, which have seen depositors spending days in queues at banks, the apex bank pleaded with the transacting public to embrace plastic money and challenged the productive sector to increase output to boost exports.

Addressing delegates who attended yesterday’s Zimbabwe International Trade Fair (ZITF) International Business Conference in Bulawayo, RBZ Deputy Governor, Dr Kupukile Mlambo, dismissed proposals by some sections of society to adopt the rand saying doing so was risky to the economy.

“The adoption of the rand is not the solution. Our solution is in the factories where we need to increase production in order to boost export earnings. We need to increase output across sectors,” said Dr Mlambo.

He said the Government was working on creating an enabling environment and only then will foreign currency increase and not through the rand.

“What we advocate for in the meantime is that we use more of other currencies in the multiple-currency basket instead of the US$ only. The rand is useful for transactional purposes but cannot be relied on as a stock value given its relationship with the US$,” said Dr Mlambo.

The Deputy Governor said due to low export receipts the country does not have enough cash reserves at the banks yet demand for bank notes remains the same.

“The truth is that only two percent of our bank liquidity assets are in notes and coins. The rest are treasury bills and RTGS. Only four percent of our deposits at the moment are in cash yet demand is still as it was in 2009. This is why we are saying we need to swipe more. External loans are also diverting foreign earnings,” he said.

Dr Mlambo said banks were in a dilemma because the bulk of the cash they were disbursing in withdrawals was not coming back as deposits hence the apex bank had adopted a firm stance to deal with hoarding and money laundering.

“Too much money is going out of the country and lots of it goes to pay for imports. Since 2014 foreign payments have been higher than inflows. A lot of cash is leaving the country illegally,” he said.

The Deputy Governor also said externalisation of foreign exchange was still a challenge with figures showing that more Zimbabweans were depositing millions of dollars outside the country.

He said the country had since 2009 lost more than $2.83 billion through illicit financial flows. In view of the above challenges, Dr Mlambo said, the RBZ has come up with measures to stabilise the financial services sector, working with relevant stakeholders with a broader view to increasing earnings for the economy.

The central bank is spearheading financial inclusion programmes and supporting the productive sector through the bond notes export incentive. The bank is also supporting the gold mining sector with loans to retool so that it can boost output.