Zimbabwe Money

Reserve Bank  Of Zimbabwe

Money has a significant role in economic growth. 
Zimbabwe's recession is worsened by an absence of local money and credit. Instead of developing practical solutions to resolve the money crisis, politicians and analysts are locked in an existential power struggle.

Credit is economic money. Failing to understand this, The Reserve Bank of Zimbabwe(RBZ) printed fuelling hyperinflation. Without factories to stimulate employment and money flow, money flowed direct into pockets driving up prices.

Money prospers, when it is given as credit to firms for productive activities. RBZ hyper-inflationary printing crowded out productive investment and encouraged speculation.

Currently RBZ cannot create base money. Also, banks cannot lend given high loan delinquency levels and dismal economic performances. Lacking credit,  Zimbabwe's economy lacks the stimulus it needs to recover.

RBZ needs an operational framework to rebuild a balance sheet. This is  not permission to print base money, the bank's ineptitude would bring back super inflation. A well funded balance sheet is  needed to support banks that feed  the Zimbabwe's economy.

RBZ owes banks foreign currency and this weakens the liquidity of owed banks- meaning less funds for credit. These two predicaments indicate RBZ cannot achieve outcomes in this environment of repeating political failures. Politicians and analysts identify they is a problem, they do need to work together and resolve the crisis.

　

Zimbabwe Economy 2014

Economic growth will contract in 2014, given persistent company closures. Real value will be generated in the susbsistence and dollar funded informal sector. Use of the US$ will ensure at most 2% real economic growth, inflation of 5% and GDP per head of US$200.00.

A return of the Zimbabwe dollar will further drive out capital and reintroduce hyperinflationary pressures, as the institutional dynamics of currency stability have not been reinforced in Zimbabwe's economy. A lack of confidence in Zim dollar still persists encouraged by an absent credible macro-economic plan.

Currency and funding shortages will persist, they is no strategy in place to deal with persisting liquidity challenges. Businesses need working capital, which given the scarcity of commercial paper and high interest rates is hard to come by: companies will continue to close, in 2014. Water and electricity shortages will guarantee difficult trading and living conditions for the nation's citizens. The State's Look East policy is not generating the infrastructural investment required to bring about medium term growth.

Dollar Effects

The US Dollar has come with its own problems.

Its scarcity, in Zimbabwe, is creating serious funding challenges.

Banks, firms and households are in the midst of a liquidity crisis.

The US Dollar resolved the inflation crisis which was facillitated by poor economic management.

However, dollarisation has not resolved the issue of poor economic management.

The house of Zimbabwe is still in disorder.

With the dollar further weakening export competitiveness, and with foriegn investors, plus donors shunning Zimbabwe; only resolving the economic management crisis and returning the Zim dollar can help Zimbabwe recover.

Speaking to fellow Zimbabweans yesterday, I realised people assume the problems of Zimbabwe's economy will magically resolve themselves.

This is wishful thinking for without  action Zimbabwe's problems are only getting worse.

Factories continue to shut down and our 'leadership' lacks the mettle to get rid of the rot.

Counting The Cost

Development has a price. Luke 14:28, tells the parable of a builder wanting to construct a tower, before starting the project the contractor ensures all costs and contingencies are taken into consideration.

What is the price of dictatorsip? Underdevelopment is one and poverty is another. Talk of a returning Zimbabwe dollar is being encouraged in nationalist circles. This will only signal the return of inflation.

Dictatorship stifles the majority. Ideas are muzzled and one party cannot encourage diverse ideas. Zimbabwe has no industry, this is the nation's Achilles's heel. Bringing back the Zim dollar, without productive capacity to boot, will push the country ten years back. Indigenisation of the service industry, foreign banks being the main target, will initiate the final collapse of Zimbabwe's economy. When banking indigenisation is completed, be warned, The Zim dollar, with many zeroes, is coming back.

Defining economics

Economics is broadly defined as being the study of scarce resource allocation by society. Various theorists have various definitions. Practically economics involves choice in the use of resources, and all these choices have consequences.

Everybody is an economist. We all make choices with regards to how we use time, consume, expend mental energy and transact with our fellow man plus environment. Economics has a problem in that it involves everything. Researchers therefore pick and choose what to study.

These 'schooled' economists follow different schools. No school can explain everything-all schools have limitation- schools related to finance make the most money as they serve financial services. This leaves other schools, with valuable lessons to teach, out in the cold.

The Zimbabwe economy suffered hyperinflation as a sequence of following various schools. The Zimbabwe dollar was removed to reduce inflationary pressures that had worsened the availability of resources. Zimbabwe needs to find more applicable schools of economics to suit its unique institutional setting.

As economics involves institutions, cultural beliefs, complex human behavior, historical influences, political forces, human desires and fears, its scope of study is unlimited. What works in one place, like a Structural Adjustment or Austerity Program, will not work in a different socio political setting. Resources might be limited, but ideas are not. Economic schools need to unlimit economic thought in accord with the laws of nature. They is no limit on thought and creativity which fuel human progress and enterprise.

Read widely-they is no limit to understanding the economy. We are all economists.