Today: Saturday, 24 February 2024 year

Zimbabwe: currency crisis stymies reform

Zimbabwe: currency crisis stymies reform

Zimbabwe’s new government aimed at the reviving the economy and strengthening the currency, Financial Times reports. Emmerson Mnangagwa, who was installed as president when army commanders overthrew Mr Mugabe last year, has declared Zimbabwe “open for business”.

Zimbabwe’s leader has courted investors from London to Beijing and promised to change laws that are hostile to foreign investment.

“Zimbabwe’s opening up for everybody . . . it is certainly more open for business than it has been for decades,”

confirmed Adonis Pouroulis, a member of a South African mining family whose investments include Tharisa, a London-listed company that has forged ahead with deals to invest in platinum and chrome mines in Zimbabwe since Mr Mnangagwa took power.

So far, the new government invited many white farmers to be back on their lands, such a move could be extremely helpful for the totally ruined agricultural sector. But the influx of foreign cash needed to resolve the currency crisis and spur economic growth hinges on presidential elections this month and whether Mr Mnangagwa’s ruling Zanu-PF reverts to type and rigs the polls.

Now, in Zimbabwe, without that international investment, closed ATMs, empty petrol stations and a convoluted daily hustle to find petty cash will remain a fact of life in the African country.

This economy is almost dead, people say when Mugabe was there, things were tight with cash but now it’s even worse. The scarcity is due in part to too few dollars flowing into Zimbabwe. Export industries declined under Mr Mugabe and instability in Zanu-PF in the last years of his presidency scared off foreign investment.

This year, the Zimbabwean Cabinet has also run up huge electronic balances to service a budget deficit, including a $1.2bn central bank overdraft as of February this year. This has bloated the financial system, with about $8bn in deposits versus less than $70m cash in banks, leading many to store up physical cash.

“This is an economy that is operating without a currency,”

said Yvonne Mhango, Sub-Saharan Africa economist for Renaissance Capital.

“The slowdown we are seeing is due to the liquidity crisis.”