Economy heads for a bloodbath: Biti
Biti warned of a total collapse in aggregate demand as businesses struggle with punitive debt charges and limited access to affordable capital.
FORMER Finance minister Tendai Biti has warned of a bloodbath in the absence of a liberalised the exchange rate and an injection of liquidity into the economy.
His warning comes on the back a persistent liquidity crunch, exchange rate volatility and a wave of business closures and corporate rescues.
“Companies are paying the price of an uncertain political regime and exchange rate mismanagement. The introduction of the ZiG [Zimbabwe Gold] currency has only brought chaos to the economy,”he told NewsDay Business.
The Zig was introduced in April last year in Zimbabwe’s sixth attempt to establish a stable currency in over a decade.
Biti warned of a total collapse in aggregate demand as businesses struggle with punitive debt charges and limited access to affordable capital.
“It’s going to be a bloodbath for businesses in 2025,” he added.
To prevent further decline, Biti said the economy must be liquid.
There must be cheap money in the market to allow access to funding and ensure businesses survive, he said.
Biti also criticised export surrender requirement, describing it as an unnecessary burden that limits access to foreign currency.
“Export surrender requirements are an additional threat to business. Removing them would ensure a huge chunk of foreign currency is available in the market,” he said.
Exporters surrender 25% of their proceeds in exchange for local currency at the prevailing interbank exchange rate.
Biti called for the removal of money transfer fees, which he said were stifling economic activity and increasing the cost of doing business.
“These fees are choking businesses and making it impossible for them to operate efficiently,” he said.
Biti expressed concerns over the political uncertainty exacerbated by a push for President Emmerson Mnangagwa to extend his term beyond the constitutionally mandated two terms that end in 2028.
“The uncertainty created by Mnangagwa’s third-term ambitions and the removal of key officials is discouraging investment and deepening the crisis. Such moves create suspicion and erode trust in governance,” he said.
Mnangagwa recently appointed new heads for the police and the intelligence agency.
Biti said the political climate is driving businesses to relocate to South Africa and other neighbouring countries, while investors remain hesitant to commit.
Economist Chenaimoyo Mutambasere pointed to a gloomy outlook, saying the 2025 budget requires US$38 billion to address the country’s needs, but government revenue and expenditure are both pegged at US$7 billion.
“With 60% of the population already living in extreme poverty, the situation is dire. The country needs a miracle to recover,” she said.
Over the past year, companies have shut down, downsized, or sought corporate rescue in response to worsening economic conditions.
These companies are Beta Bricks, Khayah Cement and Truworths.-newsda
