5/9 Total RBZ external debt was US$4.8bn in March 2021. Block funds US$2.2bn. According to the mid term review this has grown to US$2.8bn.
Therefore RBZ debt is at least US$5.4bn
6/9 The farmers deed of settlement which is a public debt is US$3.5bn.
It’s salient features are not fully known eg interest rates. There are rumours that if a certain amount is not settled within a given period the debt due becomes US$5bn.
In the wake of Professor Mthuli coming out and signaling the intention of GOZ to introduce a currency board it’s worth revisiting the essentials/fundamentals as we await full details from the authorities.
2/24
A currency board (CB) is a good thing and we have said as much in the last three years.
The sanctity of the currency board mechanism, depends on a number of factors, which I will list and elaborate on.
3/24
It’s rather odd that the announcement is coming from Treasury. From our current laws this should come from the central bank. We would let this pass if treasury & RBZ were working in concert. This is not the case and we are weary of stillborn ideas that never gain consensus.
The Zimbabwe Public debt both internal and external is now US$18bn. With current debt at extremely punitive interest rates and onerous terms, secured against the country’s major exports.
Treasury puts the national debt at US$18bn at 99.6% of GDP.
Admitting that Zim GDP is actually US$18bn.
Zimbabwe in 2013 had a GDP of US$19bn. According to the Ministry of Finance and Economic development Zimbabwe has NOT grown over the last ten years.
3/12
Zimbabwe has not been servicing most of its debt and is penalized each year for this and this debt continues to accrue interest rate at a compounding rate. 36% of the public debt is now arrears plus penalties.
There is a lot of ignorance on how international trade occurs.
That US$11.6bn transferred into Zim without hassle means there is no sanction against Zim.
The RBZ is correct to respond to allegations of money laundering. Zim is a signatory of Vienna, Palermo & Merida conventions
A lot of the arguments made on sanctions are political. And have to do with grandstanding & moral authority. Meaning, those who imposed targeted sanctions against certain persons do so not as a matter of law but as their prerogative. Based on moral principle.
It reasons therefore that opposition to sanctions is also political and moral.
This has nothing to do with international trade. Zim demands that China pays for its tobacco & gold in American dollars with OFAC oversight.
Formal dollarization worked under 2009-2013 until settlement was moved from the banks to RBZ.
Once clearing (RTGS) was with RBZ & banks lodged cash with RBZ, casino economics started. RBZ started creating RTGS fictitious dollars.
2/20
Fractional banking by banks creates money but the risk remains with the bank. Meaning you can have two banks. One aggressive & the other conservative in its lending & both creating credit deposits.
3/20
The hope in creating credit is that the borrower will increase business & earn in the future to service the loan.
Suppose the future fails. WITHOUT central banking, the aggressive bank will fail while the conservative bank will survive.
Only 40% of Zimbabwe has access to electricity. 60% are in the dark. The 60% are the poorest.
63% of Zimbabweans use firewood to cook. These are the poor.
Invariably electricity in Zim is NOT a necessity. It is a luxury for the majority
Unfortunately the pricing of electricity subsidizes the elite. Often Zimbabweans confuse themselves with South Africans where 94% of citizens have access to electricity.
Not so much in Zim.
Priority number one for electricity is business. Not domestic use.
It’s business that has suffered the most from the unavailability of electricity.
Business working hours cannot be extended to between midnight and 6am.
And a whole lot more that will render finite resources useless. We saw Tesla replacing Cobalt with LFP.
Aluminum ingots in the 19th century were priced at $550/pound before plummeting to 25c/pound in just 40 years.
Innovation discovered more aluminum & substitutes.
Ghana believes the secret sauce to Swiss chocolates is cacao farming. DRC warlords control cobalt mining. The Great Lakes region is unstable at the moment on account of controlling “finite” resources.