Zimbabwe’s inflation rose to a new 10-year high of 59.39 per cent year-on-year in February from 56.9 per cent in January, the statistics agency Zimstats said on Friday.
 
Zimstats said in Harare that the inflation was pushed by increases in the price of basic goods.
 
On a monthly basis, prices increased by 1.67 per cent in February, compared to 10.75 per cent in the previous month.
 
Zimbabwe’s Central Bank Governor, John Mangudya had said on Monday that annual inflation rate should fall to between 10 and 15 per cent by the end of the year.
 
However, economists said the figure could be higher due to price pressures from the exchange rate and a drought.
Zimbabwe’s currency devaluation last week has led to a more realistic exchange rate, yet thin trading implies the new official interbank market isn’t as free as officials suggested.
 
The central bank announced on Feb. 20 that its quasi-currencies -- bond notes and their electronic equivalent -- would no longer be valued at parity to the dollar and would be traded on an official interbank market.
 
Since then, the bond notes, now known as RTGS dollars, have weakened to 2.5 against the greenback, while the black market rate has appreciated almost 9 percent to 3.36 per dollar, according to marketwatch.co.zw, a website run by financial analysts in Harare. The tight trading band on the interbank market -- rates have ranged between 2.5001 to 2.5042 this week -- indicates trading isn’t totally free. The RBZ seems to be the only supplier of dollars, with just $7.7 million traded as of Thursday, a person familiar with the matter said.
 
The gap between Zimbabwe's formal and parallel FX rates is still wide
 
There’s also been some improvement, again modest, with equities.
 
The dollar squeeze roiled the stock market, with locals piling into it to hedge against inflation, which is officially 57 percent but may be as high as 270 percent, according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore. That caused foreign investors such as Cape Town-based Allan Gray Ltd. -- which struggle to get their money out of the country because of capital controls -- to write down their holdings to more realistic levels. They measure how out of whack prices are by taking the difference between the Harare and London shares of Old Mutual Ltd., Africa’s largest insurer.
 
The Harare stock has sunk 18 percent this week to $7.50, which in Zimbabwe’s skewed markets is a sign that the liquidity crisis is easing. It’s now 4.5 times the price of that in London, when converted to dollars, down from 6.3 in January.
 
Old Mutual shares are 4.5 times more expensive in Zimbabwe than London
Investors won’t be confident the foreign-exchange crisis is over until Zimbabwe’s formal and informal currency rates and the so-called Old Mutual implied rate all converge.
 
Almost two decades of profligate monetary policy has destroyed Zimbabwe’s economy and fueled rampant inflation, decimating the savings of its people twice.
 
Hyperinflation of as much as 500 billion percent in 2008 made savings worthless and led to the abolition of the local currency in favor of the dollar the following year. In 2016, former President Robert Mugabe’s cash-strapped government introduced securities known as bond notes that it insisted traded at par with the dollar. In 2018, it separated cash from electronic deposits in banks without reserves to back them, causing the black-market rate to plunge.
 
Last week, it threw in the towel and allowed bond notes to trade at a market-determined level, once again slashing the value of savings. The decision came after the southern African nation faced shortages of bread and fuel, was hit by strikes and protests, and President Emmerson Mnangagwa’s drive to attract new investment floundered.
 
“At the root of this is the currency crisis,” said Derek Matyszak, a Zimbabwe-based research consultant for South Africa’s Institute for Security Studies. “This is analogous to them creating a giant Ponzi scheme that originated under Mugabe. What we are seeing now is that Ponzi scheme collapsing.”
 
‘1-to-1 Fiction’
The latest step, while welcomed by what’s left of the country’s business sector, is unlikely to solve Zimbabwe’s problems because all it does is reflect exchange rates on the black market, according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.
 
“The 1-to-1 is a fiction,” Hanke said. “They are saying officially we are going to condone what has been happening anyway. It officially says, ‘we robbed you.’”
 
The gap between Zimbabwe's formal and parallel FX rates is still wide
The interbank rate for the new currency is about 2.5 to the dollar, data published on the central bank’s website shows. That figure is meaningless because the authorities are failing to divulge the volume of trade, according to marketwatch.co.zw, a website run by financial analysts. It estimates the black-market rate for the bond notes is 3.36 per dollar.
 
We see this interbank rate as completely meaningless until the Government allows for transparency on volumes etc.. As for the general public the Parallel market is still flourishing.
 
The origins of Zimbabwe’s currency crisis stretch back to a violent land-reform program initiated by Mugabe in 2000, which slashed export income and devastated government finances.
 
In response, then-Reserve Bank of Zimbabwe Governor Gideon Gono, known as ‘God’s banker’ because of his close ties to Mugabe, increased printing of Zimbabwe dollars exponentially to pay government workers, stoking inflation and eventually making the currency valueless.
 
Printing Money:
“It was a Ponzi scheme in the past,” said Ashok Chakravarti, an economist and lecturer at the University of Zimbabwe. “Especially in the Gono era, where that chap just kept printing money.” Gono didn’t answer a call to a mobile phone number he has used in the past.
 
The currency’s collapse led to the predicament Zimbabwe now finds itself in -- chronic cash shortages and rampant inflation.
 
By late 2008, some Zimbabweans had reverted to barter trade as illicit dealings in foreign currencies flourished. In February 2009, the answer the government came up with was to switch to the use of foreign currencies, mainly the U.S. dollar.
 
“Dollarization puts a hard budget constraint on the system,” said Hanke. “You can’t go to the central bank or any other government institution to get credit for the government.”
 
Repaying Debt:
The pressure on government finances led to history repeating itself, with a loophole being found: the introduction of bond notes and locally denominated electronic money. That contributed to money in circulation growing to more than $10 billion, according to George Guvamatanga, the permanent secretary in the Finance Ministry. The figure was $6.2 billion in 2013, said Tendai Biti, a senior opposition leader and former finance minister.
 
“If you continue to print money you are destroying what you are creating,” Guvamatanga said. Under a stabilization program introduced by Finance Minister Mthuli Ncube in October, the government is now repaying domestic debt, has stopped issuing Treasury bills and has no overdraft with the central bank.
 
That’s helped the economy move toward “walking on two legs, there is an effort to go in a different direction. It’s an inevitable adjustment.”” Chakravarti said. “It’s very unfortunate that this is the second time in 10 years people have lost the value of their savings. In 2009 we all went down to zero including me.”
 
For some observers the latest development isn’t a sudden discovery of fiscal discipline. It’s another admission of failure and the victims are Zimbabwe’s people.
 
Zero Savings:
To Biti, who says the new currency will fail because it isn’t backed by reserves, it shows the country has come full circle.
 
“It’s theft because people had regrouped and rebuilt their lives from zero based on the U.S. dollar,” he said.
 
The country’s best hope is to join southern Africa’s Common Monetary Area, which is dominated by South Africa and its rand, Biti said. That would give certainty to business and impose fiscal discipline on the government, as opposed to the current arrangements that are unsustainable, he said.
 
“It’s a Ponzi economy,” he said.
South Africa has disclosed that it turned down a request from Zimbabwe for an emergency loan of $1.2bn (£932m) in December.
 
Treasury spokesman Jabulani Sikhakhane said South Africa did not have "that kind of money".
 
Zimbabwe's government had hoped to use the cash injection to stabilise the ailing economy and resolve fuel shortages in the country.
 
Soon after the request was rejected, Zimbabwe's President Emmerson Mnangagwa was forced to announce a steep increase in the price of fuel - a move which has caused angry protests.
 
Police have violently repressed the protests that broke out mainly in the capital, Harare, and the southwestern city of Bulawayo, with some reports that they were conducting door-to-door searches and using of live ammunition.
 
Human rights groups say at least a dozen people have been killed, but there has been no official confirmation.
 
The UN called on the government to halt the "excessive use of force" by security forces.
 
President Mnangagwa tweeted that he was abandoning plans to attend the Davos economic summit and return home to deal with the crisis.
 
 
Source: BBC
 
Zimbabwe will introduce a new currency in the next 12 months, the country’s Finance Minister said, as a shortage of United States dollars plunges the financial system into disarray, forcing businesses to close and threatening unrest.
 
The southern African nation abandoned its own hyperinflation-wrecked currency in 2009 at the height of an economic recession, adopting the greenback and other currencies including sterling and the South African rand.
 
But without enough hard currency to back up the $10 billion of electronic funds trapped in local bank accounts, businesses and civil servants are demanding payment in cash which can be deposited and used to make payments both inside and outside the country.
 
Mthuli Ncube told a town hall meeting late on Friday that a new local currency would be introduced in less than twelve months.
 
“On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years,” he said.
 
Zimbabwe currently has less than two weeks import cover, according to central bank data, and the government has previously said it would only consider launching a new currency if it had at least six months of reserves.
 
Locals are haunted by memories of the Zimbabwean dollar, which became worthless as hyperinflation spiralled to reach 500 billion% in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.
 
A surrogate bond note currency introduced in 2016 to stem dollar shortages has also collapsed in value.
 
President Emmerson Mnangagwa is under pressure to revive the economy but, in something of a vicious circle, the dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.
 
With less than $400 million in actual cash in Zimbabwe according to central bank figures, there are fuel shortages and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium of up to 370%.
 
The Confederation of Zimbabwe Industries has warned some of its members could stop operating at the end of the month due to the dollar crunch.
 
Zimbabwe’s iconic manufacturer of cooking oil and soap, Olivine Industries said on Saturday it had suspended production and put workers on indefinite leave because it owed foreign suppliers $11 million.
 
A local associate of global brewing giant Anheuser-Busch Inbev said this week it would invest more than $120 million of dividends and fees trapped in Zimbabwe into the central bank’s savings bonds
 
 
Source: Global Market
 
Zimbabwe has appointed an independent administrator to run its loss-making national airline to try and revive its fortunes, according to an official notice.
 
Air Zimbabwe has been struggling with a $300 million debt, including to foreign creditors. Only three of its planes are operational, with another three grounded, which has forced it to abandon international routes.
 
Justice Minister Ziyambi Ziyambi appointed Harare-based chartered accountant Reggie Saruchera as administrator with powers to “raise money in any way without the authority of shareholders for the purposes of the reconstruction,” according to a government gazette published late on Friday.
 
Finance Minister Mthuli Ncube said on Friday the government was hoping to sell stakes in Air Zimbabwe and other state-owned companies under a package of reforms - though the airline has failed to attract private investors in the past.
 
The government said in April it had bought two Boeing 777 aircraft and an Embraer plane from Malaysia but added that the planes would be leased to a new local airline until Air Zimbabwe returned to profitability.
 
 
Source: News24

Zimbabwe’s annual inflation rate rose 1.38 percent to 4.29 percent in July 2018, latest figures from the Zimbabwe National Statistics Agency (ZImStats) show.

This was a significant upturn from the June 2018 figure of 2.91 percent.

On a monthly basis, the inflation rose 1.03 percentage points to 0.98 percent.

“The month-on-month inflation rate in July 2018 was 0,98 percent gaining 1,03 percentage points on the June 2018 rate of -0,05 percent,” said ZimStats in its monthly update.

Some observers have attributed the quickening inflation to the continuance of the parallel currency market.

Although the Reserve Bank of Zimbabwe (RBZ) has maintained the US dollar-bond note official rate at 1:1, cash shortages have resulted in a thriving black market for physical currency, both bond notes and United States dollar notes.

It is largely expected that the high demand for US dollars by both companies and individuals continues to push up the exchange rate.

 

Source: Vanguard

Harare — Parliament backed down Monday from its demand for former president Robert Mugabe to answer questions related to diamond mining operations during his time in office.
 
In what would have been his first public appearance since being ousted last November, parliament had wanted to question Mugabe about his claim that the state had been deprived of at least $15 billion in revenue by mining companies operating in the eastern Marange diamond fields.
 
The legislative committee's pursuit of Mugabe had been condemned by a fledgling opposition party linked to the veteran leader.
 
Mugabe had twice failed to appear before the Temba Mliswa chaired mines committee of parliament and was given a final chance to do so on Monday.
 
However, the committee said in a statement it had now recused the 94-year-old former leader after consultations with the Speaker.
 
The committee did not give any more details.
 
"The former President, His Excellency Cde RG Mugabe, was unable to attend at the appointed hour and the committee was due to meet to consider summoning him as a measure of last resort but after consultations with the Honourable Speaker, he was recused from attending," said Mliswa in a statement.
 
He also condemned the refusal by home affairs minister Obert Mpofu to appear before the committee.
 
"In the same vein the non-appearance by the Former Head of State His Excellency Cde RG Mugabe to answer questions on the missing $15 billion diamond revenues, heightens the perception that both may have been complicit on this issue.
 
"Closure on the alleged missing $15 billion diamond revenues is possible if the former President clears the air on the context he made the assertion that the country lost such amount. The Ninth Parliament must pursue the matter to its logical conclusion."
 
A parliament official privy to the issue had told News men in May that it was unlikely Mugabe would appear before the committee because this was opposed by influential politicians in President Emmerson Mnangagwa's ruling Zanu PF party.
 
Mugabe said in March 2016 the country was robbed of wealth by diamond companies including joint ventures between Chinese companies and the army, police and intelligence services.
 
He later expelled those firms last year and replaced them with a state-owned diamond company.
 
The Mugabe-backed National People's Front (NPF) accused Mliswa's committee of abusing parliamentary procedures through what he called a "fake process aimed at obfuscating debate around the abuse of diamonds and diamond revenue through illegal mining activities by Zimbabwe's Security ministries."
 
In a statement, NPF wondered why the committee had not quizzed the military over its involvement in diamond mining at Marange.
 
"The activities of the parliamentary portfolio are meant to exonerate President Emmerson Mnangagwa and Vice president Constantino Chiwenga from allegations of looting diamonds by creating a sideshow involving the former president."
 
Source: New Zimbabwe

Econet Wireless says its extraordinary general meeting to consider a proposed $130 million capital raise will go ahead as planned on Friday, setting itself on a collision course with the Zimbabwe Stock Exchange which directed the company to postpone it until ‘certain technical issues’ are clarified.

The rights issue has generated some controversy largely due to its requirement that shareholders pay abroad to subscribe, a move that analysts say would disadvantage pension funds and other minorities who might not be able to follow their rights. Econet says it needs to raise the cash offshore to pay off its external debt, which it has increasingly struggled to amortise due to Zimbabwe’s foreign currency crisis. 

ZSE chair Caroline Sandura said in a statement issued late on Wednesday the bourse asked Econet to defer its vote on the transaction.
But Econet countered with its own statement in which it said it had, along with the central bank, put up a facility to allow local shareholders to participate in the rights offer.

It said a rights offer account has been opened with Econet’s wholly-owned subsidiary Steward Bank, where local shareholders would deposit the proceeds of the rights offer in accordance with the timetable published in the company’s circular dated 17 January 2017. The underwriter, Econet Global, will pay the equivalent of the amount contributed by the resident shareholder to the international receiving bank, Afreximbank.

“Those resident shareholders who follow their rights by paying into the designated local account shall be deemed as having discharged their obligations as set out in the Rights Offer Circular and shall be entitled to the issue and allotment of their Rights Offer shares,” said Econet.

“In the circumstances, members are advised that the extraordinary general meeting shall proceed as published in the circular,” it added, saying members should disregard “any notice to the contrary not coming from the company.”

ZSE’s Sandura is yet to respond to the latest move by Econet.

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