Foreign currency drought stifles Zim trade

Zimbabwe importers,

exporters and business

owners are struggling to

conduct business due to a

lack of foreign currency –

which is vital to procure

raw materials not only from

outside Zimbabwe’s borders

but also from inside the

country.

A senior Zimbabwean

businessman told FTW that

when he went to the bank last

week, although

he had a

substantial

balance in

his account,

he could draw

US$20 and

R400 in cash.

“As a business

owner, I can’t

do much with

that,” he said.

“At the

moment, they

seem to have run

out of the local bond notes

and large denomination US

dollar notes have vanished

from the economy,” he added.

The latest shortage

of foreign currency is

attributable in part to the

introduction in November

last year of a form of domestic

currency known as the

‘bond note’. Bond notes and

US dollars are now both in

circulation in Zimbabwe. The

government has pegged the

value of the bond note as 1:1

with the US dollar. However,

bond notes have no value

outside Zimbabwe, and even

inside Zimbabwe they are

often reluctantly accepted.

With the bond note in

circulation, people are

holding onto any currency

with real value – the US

dollar and, to a much lesser

extent, the South African

rand.

The most recent foreign

currency shortage is

evidence that Zimbabweans

(and others) do not trust

government economic

policies. Consequently, they

do not place much value in

these latest promissory bond

notes. The public tends to try

to offload bond notes while

hoarding higher value foreign

currency.

The solution to the shortage

of foreign currency would

be for Zimbabwe to develop

and rehabilitate its own

currency. What militates

against this, according to ex

Zimbabwe Finance Minister

Tendai Biti, writing in the

Daily Maverick, is that the

people of Zimbabwe ‘have no

confidence in the government

to support a national

currency of their own’

Compounding this

problem is the fact that the

Zimbabwean government

spends more than the country

earns and, at the same time,

its bizarre policies have killed

nearly any incentives to

invest.