Home » Business » Lax Rules Cost Zim $3 Billion Yearly, Nation Now Source of Hard Currency, Calls to Tighten Cash Regulations

Individuals and businesses are taking US$3 billion out of Zimbabwe annually, making the country a major source of hard currency for the Sadc region, experts say.

Many companies in the region view Zimbabwe as a source of US dollars due to weak cash movement regulations which enable people to move large sums of money out.

This, experts say, has contributed to the current liquidity crisis.

There are unconfirmed reports that some merchants are exchanging South African rands for millions of US dollars on the local market for speculative purposes as the rand continues to fall against the greenback.

University of Zimbabwe lecturer Professor Ashok Chakravarti and Reserve Bank of Zimbabwe Deputy Governor Mr Khuphukile Mlambo told participants at a Sapes Trust policy dialogue on the liquidity crisis on Thursday in Harare that urgent measures were needed to address the situation.

“At the moment by our calculations we have about US$7 billion worth of imports and about US$4 billion worth of exports.

“We are exporting at least US$3 billion worth of liquidity. When imports exceed exports, you are actually exporting liquidity.

“A lot of that is already circulating outside the country and we are working on plans to force the companies to remit the money back. In a dollarised economy those exports are part of your money supply,” said Mr Mlambo.

He said the use of US dollars made the country’s economy very uncompetitive, adding there was a need to have local currency whose exchange rate the monitory authorities would manipulate for the benefit of industry to boost production.

This comes amid reports that the US dollar looters were taking aantage of relaxed laws on foreign currency exchange that allowed local and foreign firms to sell their products, amass the currency and leave the country without being asked an questions.

The experts at the Sapes dialogue said the liquidity crisis would worsen if authorities did not come up with immediate solutions to deal with currency flight.

“Zimbabwe is now a source of US dollars for the whole of the region. The people come here, sell their goods, and put their US dollars in their back pockets and leave. We are going to have perpetual cash crisis in the country if this is not stopped because the people are just looting money,” said Prof Chakravarti.

Zimbabwe predominantly uses the US dollar as currency of reference and given that the currency of its major trading partner, South Africa, continues to plummet, businesspersons come here to take money back home.

The US dollar is trading at around 1:11 with the rand, making it favourable for people to get money here and take it to South Africa.

Prof Chakravarti suggested several measures he said could help alleviate the situation. These include making the economy comparatively more competitive by adopting greater use of the rand, reviewing regulations for cash and other current transfers abroad through the banking system, and bringing Diaspora remittances into the formal sector by increasing trust and providing incentives such as tax and holiday packages.

He called on Government to improve mining laws to plug gold and diamond leakages and encourage FDI inflows through appropriate policy adjustments.

The two economists agreed on the need to improve corporate governance in the public and private sectors, especially in regards to huge and uncompetitive loans to senior employees.

Small and Medium Enterprise and Co-operative Development Minister Sithembiso Nyoni on Wednesday told parliament that at least US$7,4 billion was circulating in the informal sector and Government was thus formalising those operations.

Source : The Herald