1/12
SDR - Risks & fallacies
Frederic Bastiat came up with the idea of the broken window fallacy.
In simple terms, a boy breaks a shop keepers window. The distraught shopkeeper is told not to be sad, for it is good for the economy. The glazier finally has a job.
SDR - Risks & fallacies
Frederic Bastiat came up with the idea of the broken window fallacy.
In simple terms, a boy breaks a shop keepers window. The distraught shopkeeper is told not to be sad, for it is good for the economy. The glazier finally has a job.
3/12
RBZ and GOZ behave precisely as those who think the broken window creates an opportunity for the glazier & the economy is better off.
@nickmangwana called it a game changer.
The enthusiasm across GOZ is palpable. But should the economy share that enthusiasm? NO!
RBZ and GOZ behave precisely as those who think the broken window creates an opportunity for the glazier & the economy is better off.
@nickmangwana called it a game changer.
The enthusiasm across GOZ is palpable. But should the economy share that enthusiasm? NO!
4/12
Who broke the window in Zim? Who is the shop keeper? Who is the glazier?
To be very direct, RBZ has forgotten that it broke the people’s window. With its 1:1 gedye. Since 2016, US$4bn deposits lost value.
In its enthusiasm it has forgotten US$2.8bn debt in blocked funds.
Who broke the window in Zim? Who is the shop keeper? Who is the glazier?
To be very direct, RBZ has forgotten that it broke the people’s window. With its 1:1 gedye. Since 2016, US$4bn deposits lost value.
In its enthusiasm it has forgotten US$2.8bn debt in blocked funds.
5/12
These are foreign creditors whose funds are stuck in Zim & RBZ must pay them.
These blocked funds accrue interest.
The US$1bn from IMF is not even enough to pay this due amount.
What of the high interest yielding loans from Afreximbank?
GOZ is not interested.
These are foreign creditors whose funds are stuck in Zim & RBZ must pay them.
These blocked funds accrue interest.
The US$1bn from IMF is not even enough to pay this due amount.
What of the high interest yielding loans from Afreximbank?
GOZ is not interested.
6/12
Rather what GOZ is interested in is shoring up the fixed Auction rate. Never mind the exporter ( shopkeeper) losing 70% of value.
RBZ increasing its allocations/ Fx rations from US$30m to current US$49m a week, despite backlog, has shown us its intention.
Rather what GOZ is interested in is shoring up the fixed Auction rate. Never mind the exporter ( shopkeeper) losing 70% of value.
RBZ increasing its allocations/ Fx rations from US$30m to current US$49m a week, despite backlog, has shown us its intention.
7/12
RBZ will artificially support its flawed auction. SDR’s will selectively target imports and importers.
While RBZ debt’s will continue to grow as interest accrue.
Notice how RBZ speaks of US$1.8bn in FCA (customers money) & never the US$5.4 debt on its balance sheet?
RBZ will artificially support its flawed auction. SDR’s will selectively target imports and importers.
While RBZ debt’s will continue to grow as interest accrue.
Notice how RBZ speaks of US$1.8bn in FCA (customers money) & never the US$5.4 debt on its balance sheet?
8/12
Because of the legacy debts & the nightmares of the past, Zimbabweans are net exporters of currency. Shipping their savings offshore. That is why despite US$2bn of remittances ( official & unofficial) that comes into Zim, it quickly goes back offshore.
Because of the legacy debts & the nightmares of the past, Zimbabweans are net exporters of currency. Shipping their savings offshore. That is why despite US$2bn of remittances ( official & unofficial) that comes into Zim, it quickly goes back offshore.
9/12
The biggest risk of the SDR is that it will pass through Zim & go back overseas.
News of the SDR’s didn’t see ZWL appreciating on the parallel market.
The news actually saw more importers on the auction. Despite backlog. Why?
The biggest risk of the SDR is that it will pass through Zim & go back overseas.
News of the SDR’s didn’t see ZWL appreciating on the parallel market.
The news actually saw more importers on the auction. Despite backlog. Why?
10/12
The market has correctly predicted what RBZ & GOZ will do. They will donate its largesse to importers.
Instead of a relieve to creditors & exporters it’s importers that will benefit.
Imports will come with imported inflation precisely because of IMF & world printing
The market has correctly predicted what RBZ & GOZ will do. They will donate its largesse to importers.
Instead of a relieve to creditors & exporters it’s importers that will benefit.
Imports will come with imported inflation precisely because of IMF & world printing
11/12
IMF SDR’s will stimulate imports. Its importers that will be rewarded.
Broken windows make the wrong signals in an economy. The shopkeeper loses his savings & cannot expand. While glaziers will artificially increase their prices.
The economy is worse off
IMF SDR’s will stimulate imports. Its importers that will be rewarded.
Broken windows make the wrong signals in an economy. The shopkeeper loses his savings & cannot expand. While glaziers will artificially increase their prices.
The economy is worse off
12/12
A year from now the Zimbabwean economy will have many importers (glaziers.)Some fake ones- for obvious reasons.
Offshore debt will have increased because of accrued interest. Resources will shift further from investment to consumption.
Unfortunately next year NO SDR
A year from now the Zimbabwean economy will have many importers (glaziers.)Some fake ones- for obvious reasons.
Offshore debt will have increased because of accrued interest. Resources will shift further from investment to consumption.
Unfortunately next year NO SDR
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