THE frenzied price hike madness, spiking of parallel market rates and general mayhem in Zimbabwe in the past few days are nothing out of the ordinary. In fact, this is exactly what should have happened to an economy responding to fiscal and monetary policy interventions which might appear cruel at face value but will ultimately put the country back on track after years of stagnation.
An economy which has been haemorrhaging for the past two decades cannot be fixed overnight but requires painful decisions to be made now for prosperity in the future. The Minister of Finance and Economic Development, Professor Mthuli Ncube, is administering that painful medicine now but the healing process will take a bit of time and Zimbabweans must be patient.
They must appreciate that Government is going back to basics and adopting international best practices in managing the economy and this is necessary to attract Foreign Direct Investment, unlock lines of credit with international finance institutions and spur productivity in the manufacturing sector.
Granted, the process of getting the country back on track must be managed well, with minimal disruption to citizens’ way of life but ultimately, it must be done.
Government has committed to cutting expenditure and turning around the fortunes of perennially underperforming parastatals — one of the root causes of fiscal imbalances. The reforms entail restructuring the civil service currently consuming 90 percent of State revenues and privatisation of some State-owned companies. That process is already underway with new boards for some parastatals being put in place and deadwood being weeded out of the system.
The Public Service Commission is also conducting an audit to get rid of ghost workers, streamline its operations and improve efficiencies. The performance and results-based management system, which is being implemented throughout the Government bureaucracy, will ensure that it operates efficiently.
In a statement on Wednesday, President Emmerson Mnangagwa reiterated that the multiplicity of challenges confronting Zimbabwe require that Government positions the economy on a strong footing by implementing painful but necessary reforms that include cutting on Government expenditure, increasing efficiency in Government delivery systems and fast-tracking reforms of State-owned enterprises.
He said Government would institute currency reforms once the implementation of the fiscal reforms has been completed and reiterated his stance that the multi-currency would remain in place.
Prof Ncube also issued two statements from Bali, Indonesia, where he is attending the International Monetary Fund and World Bank annual meetings in which he announced that the two global lenders backed Zimbabwe’s debt clearance strategy and the country’s two-year economic stabilisation plan.
The Finance Minister also disclosed that Government had secured a loan facility from Afreximbank to guarantee the 1:1 convertibility value of Real Time Gross Settlement (RTGS) balances into the United States dollar and availability of the greenback for Nostro foreign currency accounts.
Zimbabwe’s arrears to the global lenders stand at a staggering $1,8 billion and these should be cleared to unlock fresh funding for the country which was suspended in 2000 after the country defaulted.
What is crucial, however, is that all co-operating partners and creditors at the Bali meeting uniformly supported Zimbabwe and its arrears clearance road map and that the meeting has been the best so far on Zimbabwe’s arrears clearance process.
This is a huge step for the country in its quest to get new funding and budgetary support from the Bretton Woods institutions without which Zimbabwe cannot achieve its vision of a middle income economy by 2030.
On the burning issue of RTGS/USD balances, Prof Ncube managed to calm depositors’ nerves after widespread fears over loss of value for RTGS or electronic balances at banks on the back of spiralling parallel market rates.
He said Government had put in place measures to retain value for electronic deposits. “Government recognises concerns surrounding RTGS deposits and we commit to preserve the value of these balances on the current rate of exchange of 1 to 1, in order to protect people’s savings,” said Prof Ncube in a statement.
We welcome the statements by the President and Minister of Finance as they have calmed the markets and ensured that there is clarity with regards to the economy and reforms being implemented to put the country on a sound footing.
Zimbabweans should realise that currency reforms cannot be instituted before Government has completed fiscal reforms which are necessary to ensure that the right fundamentals are in place.
Therefore, the multi-currency system will remain in place and speculators who were raising the parallel market rate on the back of scaremongering tactics that the bond note was on its way out have been put on notice.
In the next few days, we expect the parallel market rate, which has been feeding off outright lies and falsehoods peddled on social media, to gradually go down as the market self corrects. Prices of basic commodities should also follow suit.