Financial Economics and Financial Literacy

The banking system in Zimbabwe has been crippled by the worsening liquidity crises and cash shortages. Depositors are bearing the full rage of the crisis as they are not able to get cash on demand. A financial intermediary never holds sufficient balances to guarantee full withdrawals, a condition that exposes it to potential runs. Financial intermediation activity; a role carried out by banks carries a significant social risk because there is potential for systemic disruptions. Therefore, the financial situation in Zimbabwe should be taken seriously.   Investments of banks are naturally opaque, it is difficult to distinguish the problems specific to one bank from problems affecting the industry. The result is that financial distress at one entity could lead to runs on others as well. “Since the end of 2015, the country has seen its cash crisis escalate to the point today whereby Banks cannot pay out clients more than a small proportion of what is in their accounts....

The banking system in Zimbabwe has been crippled by the worsening liquidity crises and cash shortages. Depositors are bearing the full rage of the crisis as they are not able to get cash on demand. A financial intermediary never holds sufficient balances to guarantee full withdrawals, a condition that exposes it to potential runs. Financial intermediation activity; a role carried out by banks carries a significant social risk because there is potential for systemic disruptions. Therefore, the financial situation in Zimbabwe should be taken seriously.   Investments of banks are naturally opaque, it is difficult to distinguish the problems specific to one bank from problems affecting the industry. The result is that financial distress at one entity could lead to runs on others as well. “Since the end of 2015, the country has seen its cash crisis escalate to the point today whereby Banks cannot pay out clients more than a small proportion of what is in their accounts....

A plethora of policy pronouncements, substantial de-industrialisation and some remarkable and controversial economic events over the years in Zimbabwe have given rise to the question; ‘Does Zimbabwe have an economy at all?’. I have dedicated this article to really outline what exactly constitutes an economy in a country.  In a recent Facebook post by the Vice president of Zimbabwe Emmerson Mnangagwa (08 March 2017) he lamented over the way the Reserve Bank Governor; John Mangundya and the Minister of Finance; Patrick Chinamasa were handling economic issues. He stated, “These guys are too theoretical in the way they operate. Their usual excuses are monotonous. If you go to Chinamasa, he will tell you I do not have money and if you ask Mangudya he will tell you the economy is about to take off.”  An economy is definitely not an aeroplane which gets ready to take off and lands at a prescribed destination. Since the two officials mentioned by the Vice President are in c...