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Barclays MD says liquidity challenges not just an export factor

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Barclays MD says liquidity challenges not just an export factor

HARARE – Dealing with the current liquidity challenges that have resulted in greenback shortages in Zimbabwe might not entirely be achieved by increasing exports, said Barclays Bank Zimbabwe managing director, George Guvamatanga.

Guvamatanga, speaking at an analysts’ briefing to present the bank’s 2016 financial statements, gave an example of countries that have lower merchandise exports than those of Zimbabwe but are not experiencing foreign currency challenges. Rwanda’s total merchandise exports total $1.4 billion, while Senegal’s exports are $1.6 billion. Compared to these two countries, Zimbabwe’s exports are relatively higher at $3.6 billion.

Guvamatanga also used the example of Malawi, whose gross domestic product is actually equal to Zimbabwe’s total exports. Malawi also has its own currency, currently trading at ZWK716.9 to the greenback.

The Barclays chief argued that one of the problems causing is liquidity issues is the unsustainable importation of finished goods that are not critical. In 2016, Zimbabwe’s merchandise imports were valued at $5.4 billion, resulting in a trade deficit of $2 billion. Guvamatanga called for restraint in importation and efficient utilisation of critical imports with a view to prolonging their use. He gave the example of Zimbabwe’s $100 million fuel importation bill, which is ten times higher than Malawi’s $10 million bill for the importation of the same product, yet the two countries almost have a similar population figure.

Last year, government imposed SI64 of 2016, a legal instrument, to control the importation of certain goods and promote import substitution.

In his statement, Barclays’ chairperson, Antony Mandiwanza, also weighed in, saying, “Policies that foster import substitution to optimise the use of export earnings are necessary and welcome”.

The Reserve Bank of Zimbabwe also came up with a priority list, which is meant to promote efficient utilisation of foreign exchange and to re-orient import demand towards productive uses.

However, the International Monetary Fund is of the view that the country’s financial sector challenges require structural reforms and fiscal consolidation. “The financial sector’s current difficulties in securing access to (US) dollars have deeper underlying causes that need to be addressed, including through fiscal consolidation (so that government does not spend more than it has) and structural reforms to improve competitiveness and the investment climate (so that more dollars could flow into the country)”, an IMF spokesperson told FinX, through emailed responses recently.

“The IMF encourages the (Zimbabwean) authorities to move ahead with adjustment and reform in a timely manner to exploit the potential of the Zimbabwean economy”, the spokesperson said.

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