By-The Zimbabwean dollar is in a severe shortage, threatening to affect the supply of essential goods and services.

This shortage has been caused by the government’s suspension of payments to its suppliers and payouts to contractors.

Rising inflation and a volatile exchange rate prompted the government to suspend payments to its suppliers to enable Treasury to investigate those suspected of pegging prices using the parallel market exchange rate.

The government also suspended payouts to contractors to control money supply and introduced gold coins to mop up excess liquidity on the market.

However, this inadvertently resulted in a liquidity crunch, reducing the demand for goods and services.

All this is happening when Zimbabwe’s neighbour, Zambia, enjoys economic growth due to democracy and good governance.

Speaking to NewsDay, an economist, Gift Mugano, said that a continued shortage of the local currency could paralyse service delivery. Said Mugano:

The government closed the tap on liquidity, which further confirms the long-held belief that government is the biggest driver of inflation.

So now that they have stopped pumping money into the market, the results are clear.

Service providers play a very important role, so withholding funds is just a disaster for service delivery. The situation only indicates bankruptcy.

In future, companies whose payments have been delayed will refuse to do business with the government and this will result in a total collapse of public services and the projects that the government is working on.

So now that they have stopped pumping money into the market, the results are clear. Service providers play a very important role, so withholding funds is just a disaster for service delivery.

The situation only indicates bankruptcy. In future, companies whose payments have been delayed will refuse to do business with the government and this will result in a total collapse of public services and the projects that the government is working on.

Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza bemoaned the suspension of payments to government contractors saying it is negatively affecting production. Said Matsheza:

What it means is less cash in the markets, and less product off-take so it means production will go down because companies can’t produce stock as they have no funds.

We, however, hope that this would be temporary and not a long-term solution so that business goes back to normal.