By Reason Razao
ECONOMIC analysts have said negatives overshadow the positives in measures to stabilize the exchange rate and macro economy by the Ministry of Finance adding that treasury must desist from the path of propaganda and address issues crippling the economy.
Recently, there has been a rapid resurgence of macro-economic instability, with domestic inflation driven primarily by the preference for US dollar prompting the Minister of Finance, Mthuli Ncube, to introduce a raft of measures.
As part of efforts by Ncube to address macro-economic instability, the treasury lifted all restrictions on importation of basic goods while exempting all proceeds from domestic sales in foreign currency from the 15% surrender requirement.
External loans to the government will also be transferred from the Reserve Bank of Zimbabwe to the Treasury.
Some of the economic measures include, enhancing the Foreign Exchange Auction System, creating a supportive interest rate environment, and promoting the use of the domestic currency by government agencies.
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Economists have, however, dismissed the efforts.
“On the recent measures by the Ministry of Finance, I like to argue that it is a mixed bag with both positives and negatives but the negatives outweighs the positives which means that the rate will continue to run away until the ZWL is buried,” said economist Gift Mugano.
He commended the scrapping of the 15% retention on forex deposits adding that the policy measure will reduce money supply and improve business viability since exchange rate losses coming on the back of exchange rate disparities will be eliminated.
“In line with my advice, the government is directing its departments to charge levies in ZWL with a view to promote use of ZWL. Although at this stage it is not clear if taxes and duties are paid in ZWL, which must be the case now, will raise demand for ZWL and slow exchange rate depreciation,” said Mugano.
On lift export ban on basic commodities, Mugano said; “On the negatives, the decision to liberalise the imports of basic communities is expected to drain forex, threaten survival of local industries, deepen dollarisation as importers of such commodities will exclusively charge USD and ultimately push the ZWL towards the graveyard.”
He warned of potential headwinds ahead warning of inflation spiral regardless of government’s move to mute ZWL inflation saying; “Prices are spiking incessantly, massive wage erosion and failure by employers to adequately compensate workers, shrinking of companies and total collapse of ZWL.”
Another analyst, who identifies as Tinashe or Baba Nyenyedzi on Twitter, bemoaned the lack of a proper plan to arrest the economic challenges facing the country.
According to Tinashe, Treasury payments are causing the rate to spiral out of control.
“It is trite (lacking originality) for the Minister of Finance to continue on the path of propaganda and not address Zimbabweans and the economy at large. The minister was supposed to address the glaring economic realities.
“Given how the economy is performing and the fast depreciating currency it’s obvious the November budget is now out of sync with reality. A supplementary budget is necessary. This constitutional mandate is what the minister should have explained to markets. And pertinently to his line ministries who remain starved of funding yet inflation is eroding their allocations. Instead the minister thought it best to take over the governorship of RBZ,” Tinashe said.
“The energy crisis. 12-16hrs of load shedding is a national disaster which is now affecting the economy. Waning demand and lower output requires the treasury to address this issue. Output in all sectors has come down or stagnant on account of the energy crisis. Treasury expected energy growth in 2022 and 2023, will the treasury revise its numbers,” queried Tinashe.
“Treasury payments are causing the rate to spiral out of control. The banking sector credit has been reduced to US$1.5bn at best. Monetary policy at best is blunt. The elephant in the room are treasury payments outside of Zimra collections that are causing the rate to run. The obvious antagonistic relationship between the treasury and RBZ is now a cost to the economy.”
Political analyst, Kudzai Mutisi, concurred with Mugano’s view of a hostile economic situation if the government forces the use of ZWL.
“Mthuli Ncube and his RBZ friends MUST accept that the multicurrency regime is problematic, without aggressive measures to make the ZWL the “preferred” currency, they will always be firefighting. ZWL cannot sustainably coexist with USD,” Mutisi said.