'Zimbabwe heading towards de-dollarisation'

'Zimbabwe heading towards de-dollarisation'
Published: 04 September 2017 (870 Views)
THE central bank's decision to more than double the size of its bond-note programme to $500 million confirms the country is headed towards de jure de-dollarisation, which threatens to accelerate inflation, an international research body has said.

Dollarisation has two forms, namely, official/de jure and unofficial/de facto. BMI Research found that an increase in bond notes was actually de-dollarising the economy.

BMI Research warned last week that increasing money supply would contribute to an accelerated growth of inflation from 1,4% by year-end to 8,5% in 2018 - making the steepest growth since 2009.

"The Reserve Bank of Zimbabwe's (RBZ) decision to more than double the size of its bond-note programme - to $500m from $200m previously - confirms our view that the country is headed towards de jure de-dollarisation," it said.

It said the Zimbabwean economy was not returning to a prolonged period of disinflation recorded between October 2014 and January 2017 despite falling inflation in recent months.

"Instead we expect inflation will reach 1,4% by year-end 2017, before accelerating to 8,5% in 2018. This would make the steepest acceleration in price growth since the days of hyperinflation prior to dollarisation in 2009, but is a reflection of the impact we expect from a combination of increasing domestic money supply and growing shortages of imports as hard currency becomes increasingly scarce."

Economists and the International Monetary Fund say the continued growth of the parallel market is what would threaten an increase in inflation if left unchecked.

As businesses, retailers, bankers and individuals, among others head to the parallel market for hard currency - sourcing it out at premiums of between 15% and 25% - the aggregate effect would most likely be an increase in the prices of goods.

"The effect will be compounded by the likelihood of shortages of imported goods as the supply of hard currency with which to access foreign goods continues to fall," BMI Research said.

"Although the country is likely to benefit from an increase in tobacco production and gold prices over our short-term outlook, we do not believe this will be sufficient to restore the supply of hard currency in the economy to the point where businesses and households are no longer struggling with a lack of dollar liquidity."

"As such, with the stock of hard currency failing to meet the economy's demand for liquidity, we believe the RBZ will have little choice, but to accelerate its bond note programme, boosting money supply in the economy."

- newsday

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

Man breaks leg, arm in suicide bid

by Staff reporter | 22 October 2018 | 38 Views

Chiwenga threatens Chiwenga

by ZimLive | 22 October 2018 | 67 Views

RBZ captured by black market forex dealers, says Lumumba

by Staff reporter | 22 October 2018 | 47 Views

Mthuli Ncube's 2% tax court challenge dismissed

by Staff reporter | 22 October 2018 | 36 Views

Soldiers robbed

by Staff reporter | 22 October 2018 | 58 Views

P0rn stars not fit to be employed in govt offices - Ruhanya

by Stephen Jakes | 22 October 2018 | 63 Views

Wadyajena blasts Modi, Mthuli for indicating right while turning left

by Stephen Jakes | 22 October 2018 | 78 Views

MDC hijacked by dictators - Mpofu

by Stephen Jakes | 22 October 2018 | 55 Views

Chamisa 'Pfee' in fuel queue

by Stephen Jakes | 22 October 2018 | 55 Views

Of prophets-cum-political activists

by Nicole Hondo | 22 October 2018 | 35 Views

Mthuli Ncube should prioritise MDC MPs, says Mliswa

by Staff reporter | 22 October 2018 | 44 Views

Zifa complicit in Dembare disgrace!

by Staff reporter | 22 October 2018 | 47 Views

Minister voices concern over Lumumba appointment

by Staff reporter | 22 October 2018 | 46 Views

Birds of a feather, Mthuli Ncube flock with Lumumba?

by Staff reporter | 22 October 2018 | 39 Views

Political lessons from the village

by Anthony Mkondo | 22 October 2018 | 37 Views

PHOTOS: Black market cooking oil dealer in kombi crash

by Simbarashe Sithole | 22 October 2018 | 338 Views

Zimbabwean 'Ninja' honoured in Italy

by Agencies | 22 October 2018 | 108 Views

Mnangagwa's patience with Mangudya wearing thin

by Staff reporter | 22 October 2018 | 236 Views

Zimbabwe 'soldiers' invade shops, impose own prices

by newzimbabwe | 22 October 2018 | 243 Views

My question to Finance Minister - I smell a rat!

by Isaac Nkomah | 22 October 2018 | 170 Views

United Methodist Church embarks on clean-up campaign in Mvurwi

by Simbarashe Sithole | 22 October 2018 | 86 Views

Why Mnangagwa doesn't have the answers

by Robert Rotberg, Harvard University | 22 October 2018 | 165 Views

Luxury cars for ex-Mugabe loyalists

by Staff reporter | 22 October 2018 | 147 Views

Mnangagwa's Cabinet: The skeletons are tumbling

by Tawanda Majoni | 22 October 2018 | 185 Views

Guruve vendors denounce local council

by Simbarashe Sithole | 22 October 2018 | 90 Views

Chiwenga goes down memory lane

by Staff reporter | 22 October 2018 | 149 Views

Army calls for 'ceasefire' in machete attacks

by Staff reporter | 22 October 2018 | 122 Views

Zanu-PF to crack whip on errant members

by Staff reporter | 22 October 2018 | 89 Views

Zanu-PF, MDC Alliance to square off again

by Staff reporter | 22 October 2018 | 118 Views

'Stolen $90,000 belonged to Sandra Ndebele'

by staff reporter | 22 October 2018 | 123 Views

Mthuli Ncube defends RBZ

by Staff reporter | 22 October 2018 | 131 Views

Zimbabwe fuel usage up 100%?

by Staff reporter | 22 October 2018 | 79 Views

Man arrested over gun salute for dad

by Staff reporter | 22 October 2018 | 115 Views

Hookers descend on Beitbridge

by Staff reporter | 22 October 2018 | 90 Views