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Arbitrage: The terminal wound bleeding Zim economy – NewsDay Zimbabwe

Zimbabwe’s economy has been tittering on the brink for a good two decades. Some would aver perhaps for more, like three decades. The reasons for this are as varied as the number of people from whom one solicits an opinion on the matter. guest column:Admire Maparadza Dube Some say Zimbabwe’s downward trajectory was brought about by the government when it instituted the Economic Structural Adjustment Programme (Esap) at the bidding of the International Monetary Fund (IMF) in the 1990s. Some say Esap was well intentioned. Only its effectiveness was hampered by recurring droughts. Some say the haphazard land acquisition of the early 2000 destroyed the base for the agro-based economy and that coupled with inefficient (if not downright corrupt) reallocation of the land to new farmers who mostly did not have the means and/or the technical know-how to make meaningful contribution, spelt doom for Zimbabwe’s economy. Others mention government’s intervention in 1998 in the conflict in the Democratic Republic of the Congo (DRC). Not only did the cost of this intervention drain what little remained of Zimbabwe’s bank reserves, it also alienated the country from the international community. In 1999, both the World Bank and the IMF suspended aid to the country due to unwillingness to fund Zimbabwe’s military spending in the DRC. Yet a lot more are convinced Zimbabwe’s economy has been strangulated and choked by Western powers who imposed economic sanctions on the nation. The reasons for these sanctions, and their nature, are a major topic on their own and will not be dealt with here as they deserve thorough examination. What is, however, being dealt with here are the efficacies of economic interventions being made by the authorities to arrest and, perchance, improve the country’s growth prospects. More so, how these mitigations have themselves turned into economic scourges that are bleeding the economy instead of aiding it, in the form of arbitrage wounds. Is the arbitrage an oversight, a result of incompetence or deliberate opportunity cracks intentionally ignored to allow pilferage which benefits a select few? This is the main import of this article. The political and social assuagements being employed to improve the economy (along with their effectiveness) will not be interrogated here as this discussion is from an economics and finance angle, in the main. Arbitrage, in the purest sense is the act of buying financial instruments (assets that can be traded on an open market like contractual right to deliver or receive cash or evidence of one’s ownership of an entity that represent partial ownership of a company, shares, stocks and the like) in one market and simultaneously selling them in another market at a higher price, thereby enabling investors to profit from the temporary difference in cost per unit. This would happen without any inherent change in the stock itself but mostly by taking advantage of a loophole. Loopholes like trading hours (before computerisation) where a trader bought stocks in the Asian market and offloaded

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