EDITORIAL COMMENT: Only honest, hard work will get Zim economy out of the woods

10 Nov, 2018 - 00:11 0 Views
EDITORIAL COMMENT: Only honest, hard work will get Zim economy out of the woods Professor Mthuli Ncube

The Chronicle

THE ongoing Parliamentary pre-budget seminar underway in Bulawayo has witnessed robust and candid exchanges between legislators and the Executive with the economy at the centre of discussions.

This is not surprising because national discourse should rightfully focus on the economy with politics relegated to the fringes as we work towards a middle income economy by 2030.

The Minister of Finance and Economic Development, Professor Mthuli Ncube, is putting together the 2019 national budget to be presented on November 22 and the pre-budget seminar has presented parliamentarians with an opportunity to interrogate some of the pertinent issues the Minister must consider as he works on his budget.

Already, gender activists and women in general have scored a monumental victory with Prof Ncube indicating that Government has removed duty on sanitary pads.

A campaign has over the years been raging on this sensitive issue and we are glad Government has obliged.

The price of basic toiletries has soared beyond the reach of many, particularly rural girls and women.

“The cost of sanitary wear and removing duty on it, consider it done.We will have something on the budget on this issue of sanitary wear. Consider it done; there is no debate,” said Prof Ncube as he addressed MPs on the opening day of the seminar on Thursday.

On issues to do with the wider economy, Prof Ncube and Reserve Bank of Zimbabwe Governor Dr John Mangudya were in their element as they tackled questions from legislators head on, particularly the topical matter of the surrogate currency — bond notes.

Dr Mangudya defended the use of bond notes saying the real cause of problems facing the economy was not the surrogate currency but ballooning electronic balances, which are not backed by productive fundamentals.

Rejecting calls from legislators that bond notes be scrapped as they “have failed,” Dr Mangudya accused parliamentarians of lacking appreciation of real causes of the currency challenge and reminded them that bond notes had to be introduced in 2016 under a $200 million AfreximBank-backed facility as a stop-gap measure to eliminate the then rampant cash hoarding and externalisation of foreign currency, mainly the United States dollar.

As a result of financial and fiscal indiscipline in the economy, Zimbabwe has plunged into the web of an increasing money supply, spurred largely by issuance of Treasury Bills, which has provoked inflationary pressures.

The RBZ Governor said to date Zimbabwe has registered close to $10 billion electronic balances at banks, which are not backed by real money.

“In that amount only 4,5 percent are coins and notes, which is your bond notes and coins . . . therefore, if we remove them they won’t resolve the problem,” said the Governor.

“The problem is about the 95,5 percent held as RTGS balances in your accounts. Where is it coming from?” Dr Mangudya asked rhetorically, adding that the bloated balances, not bond notes, were causing inflation as they increased spending and piled pressure on the little forex reserves.

Dr Mangudya also explained why monetary authorities were maintaining the US$/bond note rate at 1:1, saying this was meant to maintain price stability on essential products like fuel and electricity.

We appreciate the clarification from the RBZ Governor and hope legislators and the generality of Zimbabweans have been schooled on these pertinent issues.

The overarching message from Treasury and monetary authorities is that we should go back to basics — honest hard work and productivity in industry will get this country out of the woods.

The reality is that most of the money in people’s accounts has been generated through speculative activities and is not real money.

We should get our industries working so that we generate real foreign currency through exports.

On its part, Government has pledged to instil fiscal discipline and reduce the ballooning budget deficit through a range of austerity measures being implemented under the Transitional Stabilisation Programme.

What is critical is that there be unity of purpose among all Zimbabweans and a buy in into the measures being implemented by Government to stabilise the economy.

There has to be a realisation that Zimbabwe has to go through a painful phase of belt tightening before the economy starts working again.

In this regard, Government needs the support of everyone as it navigates this transitional period.

What Zimbabweans should be cognisant of is that the era of speculative activities is long gone.

We need to work very hard to produce goods locally, build a solid forex base to anchor our currency and reduce the import bill.

In the words of Dr Mangudya, there is no economy in the world which can have a strong currency without a strong base.

“Your currency is as good as your production, and what are you producing Zimbabweans? If you are producing nothing you can’t have a higher currency, which is very strong. Therefore, the challenge that you are facing of foreign currency shortages is because we are not working and we must start working very hard,” the RBZ boss said.

We couldn’t have said it better.

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