The Reserve Bank of Zimbabwe (RBZ) governor, John Mushayavanhu, is under increasing pressure from industry and commerce leaders to address the escalating liquidity crisis crippling operations across sectors.
Mushayavanhu met with business leaders last week, who voiced their concerns. They said the liquidity squeeze, resulting from the central bank’s tight monetary policy, has left businesses struggling to meet financial obligations and maintain operational efficiency.
Zimbabwe National Chamber of Commerce (ZNCC) CEO, Christopher Mugaga, confirmed the business leaders’ meeting with Mushayavanhu to <a href="https://businesstimes.co.zw/business-exert-pressure-on-rbz-governor/">Business Times</a>. He said:
<blockquote>
We just came out of a meeting with the central bank governor on the Monetary Policy Statement submissions where we discussed the current crunch in terms of the Zimbabwe Gold [ZiG] liquidity.
So in our engagements with the central bank governor, we raised the issue of liquidity squeeze. We strongly believe there is a liquidity crunch hence we discussed with the governor the need to address that challenge.
The crunch has disrupted operations in most companies resulting in companies struggling to meet their ZWG obligations. We are hoping there will be an injection in the market.
</blockquote>
Also speaking to Business Times, ZNCC president Tapiwa Karoro suggested that the RBZ raise the foreign currency retention portion to above 75%, helping industry players access more forex.
Sekai Kuvarika, CEO of the Confederation of Zimbabwe Industries (CZI), said:
<blockquote>
Generally, the market is short in both USD and ZWG because of the increase in reserve requirements which mainly impacted banks and has constrained them on the lending side impacting industry and the economy.
Working capital constraints are a major issue at the moment. The resultant vicious cycle of increased demand for that liquidity may lead to defaults across value chains and affect credit cycles.
</blockquote>
Economists believe the RBZ’s efforts to control inflation and stabilize the Zimbabwe Gold (ZiG) currency have led to a liquidity crunch.
However, RBZ deputy governor, Innocent Matshe, defended the bank’s policies, stressing the importance of maintaining balance. Said Matshe:
<blockquote>
Too much liquidity will cause inflationary pressures in the economy and instability in the exchange rate.
On the other extreme, too little liquidity will lead to settlement failures and financial instability hence there is a need to balance liquidity to support the smooth functioning of the banking sector and payment systems.
</blockquote>
Economist Professor Gift Mugano criticized the RBZ’s tight monetary policy, arguing it hasn’t addressed the underlying economic challenges. Said Mugano:
<blockquote>
From its introduction, ZiG was not backed by fundamentals hence it was doomed to fail.
The government’s current approach-delaying payments to suppliers and, contractors and exporters’ 25% surrender portion- is unsustainable.
These policies are industry and will only exacerbate the economic crisis.
You don’t hold a payment of importers and suppliers, you don’t hold a payment of contractors, and you don’t hold a payment of exporters when you hold 25% of the surrender requirement portion. The authorities are killing the industry there and that will not sustain ZiG.
</blockquote>

Pindula News

The RBZ governor is getting pressure to fix the money problem hurting businesses in Zimbabwe. The economy is struggling because there isn't enough money. Business leaders met with the governor to talk about the issue and ask for help. They want more money in the market to fix the problem. The RBZ says they need to balance the money so there isn't too much inflation. But some experts think the RBZ's policies are making things worse. They say the government needs to pay its bills and not hold onto money.

Mounting Pressure on RBZ Governor Over Sector-Wide Liquidity Crunch

Economists argue that the Reserve Bank of Zimbabwe’s (RBZ) tightened monetary policies, designed to stabilise the ZiG currency and control inflation, have unintentionally disrupted business operations, constrained access to credit, and sparked turmoil in capital markets.
The ongoing cash crunch has also cast a shadow over the upcoming festive season, as both businesses and consumers face financial uncertainty.
In October, the RBZ introduced liquidity-tightening measures in response to the sharp depreciation of the ZiG in September.
As part of these measures, the central bank adjusted the official exchange rate from ZWG14:US$1 to ZWG24:US$1. By Thursday, December 5, the ZiG was trading at ZWG25.6:US$1.
To further stabilize the currency, the RBZ reduced the money supply, a move that has left many businesses struggling with limited cash flow and operational challenges.
In an interview with <a href="https://businesstimes.co.zw/liquidity-crunch-sparks-chaos/">Business Times</a>, Christopher Mugaga, who is the CEO of the Zimbabwe National Chamber of Commerce (ZNCC), said:
<blockquote>
The scarcity of the ZiG is evident, making credit access increasingly difficult for businesses. While controlling liquidity can stabilize the exchange rate, this approach without a corresponding increase in production risks further economic instability.
If liquidity is not linked to production, inflationary pressures and a loss of confidence in the local currency are inevitable. Increasing output is critical to absorbing liquidity without stoking inflation.
</blockquote>
Economist Vince Musewe said that liquidity control must be carefully balanced to prevent stalling economic transactions and hindering growth.
Industry stakeholders have raised concerns that the current liquidity crunch is diminishing aggregate demand, lowering production levels, and threatening overall business viability.
A senior banker, speaking on condition of anonymity, said:
<blockquote>
The liquidity squeeze has curtailed lending, leaving businesses unable to secure the funds they need.
This is particularly harmful during the festive season and for farmers who require post-drought financing.
</blockquote>
Monetary Policy Committee member Persistence Gwanyanya said while tight liquidity conditions may support short-term stability, achieving sustainable growth requires a careful balance between maintaining stability and fostering increased economic output.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

The Reserve Bank of Zimbabwe made rules to help the currency and control inflation, but it hurt businesses and made it hard to get money. The lack of cash is causing problems for businesses and people during the holidays. The exchange rate got worse, and businesses are struggling with not enough money. Experts say that controlling money must be done carefully so that the economy can still grow. The lack of money is stopping loans for businesses and farmers. Stability is good in the short term, but the economy needs to grow in the long term.

RBZ's Monetary Policies Hurting Business And Credit Flow

Captains of industry have urged the Reserve Bank of Zimbabwe (RBZ) to ease its strict monetary policy in the post-election period claiming this will increase liquidity and boost aggregate demand.
They say tighter monetary and fiscal policies are hurting the economy as companies are operating at reduced capacity.
In months leading up to the 23 August elections, the RBZ and the Ministry of Finance and Economic Development pursued tighter monetary and fiscal policies and vowed they would remain in place for some time.
Speaking to <a href="https://businesstimes.co.zw/industry-push-for-monetary-deal/">Business Times</a> recently, Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza said there is a need for authorities to strike an equilibrium when managing liquidity. Said Matsheza:
<blockquote>
Now that the elections are over, we have now turned our focus to production and this will (only) happen when liquidity has improved.
It is our hope that the authorities will address the current liquidity squeeze to improve our capacity utilisation and aggregate demand.
</blockquote>
Zimbabwe Stock Exchange-listed companies such as Willdale and Seed Co Limited have also called for improved liquidity during the post-election period.
The Bankers Association of Zimbabwe (BAZ) president Fanwell Mutogo told Business Times the banks understand the government’s position, but banks are of the view that the current tight liquidity situation is an unintended consequence of the monetary and fiscal measures.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Captains Of Industry Bemoan Liquidity Squeeze

Banks have urged the Government to strike a balance in liquidity management saying the current squeeze is negatively affecting companies that buy foreign currency through banks.
At the forex auction conducted on Tuesday, 04 July, foreign currency bidders only accessed just above USUS$500 000 from the benchmark of US$5 million per week.
Speaking in an interview with <a href="https://businesstimes.co.zw/banks-in-liquidity-balance-push/">Business Times</a>, Bankers Association of Zimbabwe (BAZ) chief executive officer Fanwell Mutogo said that financial institutions have run dry. Said Mutogo:
<blockquote>
Liquidity management is essential, but the challenge is to find a balance to keep the economy running.
Yes, we can confirm that ZWL$ liquidity is tight at the moment, however, banks buy forex based on clients’ demands and what it means is that the tight liquidity situation is also affecting companies that buy forex through banks.
We understand the government’s position as regards the liquidity measures which have been implemented given what was happening in the economy, however, we believe the current tight liquidity situation is an unintended consequence of the measures.
</blockquote>
The Confederation of Zimbabwe Industries (CZI) in its latest report, said that the liquidy squeeze will have the unintended consequence of entrenching dollarisation. CZI said:
<blockquote>
This [tight liquidity] is expected to foster demand for the local currency and is in line with the calls from CZI over the years for the need to balance between supply-side and demand-side measures.
Although currently the ZWL$ has been mopped out to leave industry starved of the ZWL$, it is expected that the authorities will take this as a way to have an idea about the actual ZWL$ levels that are optimal for the market.
Excess ZWL$ will cause an exchange rate depreciation while a market starved of ZWL$ might also entrench dollarisation and retard growth. It is expected that the authorities will work out an optimal balance soon.
</blockquote>
However, authorities have vowed to maintain the recently announced tight monetary and fiscal measures that have starved the market of Zimbabwe dollars.
The measures have resulted in the Zimbabwe dollar gaining ground against the United States dollar in the past three weeks.
Economists have cast doubt on the longevity of the stability and described it as “artificial”.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Banks Urge Govt To Restore Liquidity Balance

The Reserve Bank of Zimbabwe (RBZ) and bank executives have been holding a series of crisis meetings in the past few days with the view to finding a lasting solution to the liquidity crunch, reported <a href="https://businesstimes.co.zw/rbz-banks-in-crisis-indaba/">Business Times</a>.
There are concerns that the chronic liquidity crunch bedevilling the economy can potentially hamper the upcoming summer agricultural season.
Senior officials from the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development, are also part of the meetings.
Speaking to Business Times, Bankers Association of Zimbabwe (BAZ) CEO, Fanwell Mutogo, said the crisis meetings are set to continue this week. He said:
<blockquote>
The liquidity situation remains challenging but we are worried more for the farmers as this is the financing period for them.
There are a series of meetings being held among the central bank, banks and Lands, Agriculture, Fisheries, Water and Rural Development ministry and I am sure, we will come up with a solution together.
… Direction is not yet clear on how much money will banks splurge for the new season given the current liquidity challenges.
</blockquote>
Recently BAZ president Mehluli Mpofu warned that if the agriculture sector doesn’t perform well, it will affect other sectors of the economy. He said:
<blockquote>
The 2022/2023 summer cropping season has already kicked off with irrigated crops already planted and with this liquidity squeeze in the market, the desired agriculture growth will be difficult to achieve.
As an agro-based economy, agriculture performance is key to economic growth hence if the sector doesn’t perform well, this will affect next year’s economic projections.
</blockquote>
The Confederation of Zimbabwe Industries president, Kurai Matsheza, also said the liquidity crunch has hindered the funding of agriculture. Matsheza said:
<blockquote>
We are in a serious liquidity squeeze as we are failing to get working capital from the banks and with the agriculture funding being delayed the shortages of the raw material will persist in the long run as the farmers should have completed some preparations but they are yet to do so due to the liquidity crunch.
</blockquote>

RBZ, Banks In Crisis Meetings

Secretary for Finance and Economic Development, George Guvamatanga, has scoffed at claims that measures implemented by the Government to stabilise exchange rate volatility and inflation are having a negative impact on the economy.
Speaking in an interview with State media on Thursday, Guvatamatanga also said it is not true that the exchange rate has stabilised and inflation has come down because the Government had stopped paying for goods and services supplied.
He said the government has not stopped making all payments, but only those invoices and contracts priced at the parallel market rate, or overpriced. Said Guvamatanga:
<blockquote>
There is a big misrepresentation that is going on in the market that the Government stopped making payments, that is not correct, because if we had stopped the Government would not have been operational by now, if we were not paying anyone right now all our operations would have grounded to a halt.
What we have said is that we are not paying invoices and contracts priced at parallel market rate, or overpriced.
Obviously, there are those who are adamant and some who have adjusted, some are adjusting voluntarily without approaching them that we now want to change prices.
</blockquote>
Guvamatanga insisted that the government had to stop the payments as the was “overheating”. He said:
<blockquote>
The economy was overheating; everyone was overtrading and the majority of people who were reporting increased business activity were foreign currency trading; the demand was artificial. It was artificial demand because everyone wanted to get rid of Zim dollars.
So there is a readjustment that is required, even the Treasury has to readjust such that even our revenue, we must review them down.
I do agree demand has gone down, but people must know that some of the aggregate demand was artificial.
</blockquote>
Gumamatanga said there is a need for the private sector to go back to basics and do away with overpricing goods. He said:
<blockquote>
It’s not a Government (only) thing. P ‘n Pay needs to do it, OK (Zimbabwe) needs to do it, Spar (Zimbabwe) needs to do it, everyone needs to adjust.
Everyone needs to adjust and say the days of pricing things at 1,4, 1,5 (times the actual price are gone).
</blockquote>
| <a href="https://www.businessweekly.co.zw/economy-was-overheating-we-had-to-act-guvamatanga/">Business Weekly</a>

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