|Published : 13 Apr 2017, 13:19:45|
Zimbabwe suffers from severe dollar shortage
The southern African nation’s economy stabilised after dollarisation in 2009 and enjoyed a brief period of healthy growth, according to a global media report.
But it has since ground to a halt as Zimbabwe grapples with a severe dollar shortage, political uncertainty over who will succeed the 93-year-old president, who has been in power since 1980, and government policies deemed hostile to investment.
Mr Mugabe’s government introduced bond notes, a parallel currency, in an attempt to restore liquidity last year. About $110m worth of bond notes are in circulation, but cash continues to flow out of the country because of so-called “externalisation” as Zimbabwe has deindustrialised and become reliant on imports.
Bank lending has also suffered, with demand for loans outside the public sector becoming increasingly sluggish as the economic crisis has deepened.
Only 4.0 per cent of Zimbabweans took loans from banks in 2014, even though two-thirds had borrowed money in the previous year, according to World Bank data on financial inclusion.
Bank lending to business has stagnated over the past three years at about $3.6bn. As a share of domestic credit, private sector lending has slumped from 90 per cent to under two-thirds over the same period.
The data reflect not only the lack of demand from struggling business, but also banks becoming increasingly cautious as they worry about the economic outlook and feel the impact of the currency shortage.