HomeBusiness DigestEconomy stagnant, says Bloch

Economy stagnant, says Bloch

Eric Chiriga

ZIMBABWE’S economy has ceased growing and continues to deteriorate despite government efforts to revive it.

ans-serif”>”No economic growth is taking place in Zimbabwe. The economy is actually sinking,” said renowned economic analyst Eric Bloch.

The country’s standard of living continues to decline while the level of poverty is deepening.

The majority of Zimbabweans are now living way below the poverty datum line, as they have to make do with less than US$1 a day.

Bloch said Zimbabwe should reconcile with the international community because the tension between government and the community was detrimental to the economy.

“The poor relationship between the government of Zimbabwe and the international community has discouraged investment in the country,” said Bloch.

No significant investment is currently taking place in Zimbabwe because of the country’s isolation from the international community.

Foreign investors are reluctant to establish businesses in the nation because the economic climate is considered hostile.

Government’s profligate spending continues unabated resulting in huge budget deficits, excessive borrowing, hyperinflation and chronic overvaluation of the local currency.

Business says this has resulted in loss of export competitiveness.

Bloch said the introduction of new bank notes, increasing the denomination of the currency and the use of traveller’s and bearer’s cheques, was not a quick remedy to the ailing economy.

In its attempts to solve the cash crisis the Reserve Bank of Zimbabwe considered phasing out the $500 note and introducing new $500 and $1 000 ones.

Bloch said government should create a stable democratic environment and move from a command economy to a deregulated market economy.

“The government has been working in opposition with the market, for instance the introduction of price controls,” Bloch said. “The price controls interfered with market prices and this proved counter-productive.”

He said the political instability and absence of law and order impeded economic growth.

Bloch said the problems facing Zimbabwe had a political solution as political stability determines economic growth.

He said government needed to retain a measure of popular support for its actions, and this support had brought with it an assortment of damaging policy interventions such as currency overvaluation and high tariffs as well as wasteful public spending.

He said a stable macroeconomic foundation was the best public good any government could offer, but Zimbabwe’s government had failed to do so.

The country is facing serious macroeconomic problems which include soaring inflation currently at 426,6%, a decline in gross domestic product (GDP) by 11,5%, high domestic debt of $546 billion, chronic balance of payments deficit and a serious foreign currency shortage.

Bloch said government needed to devise appropriate solutions to solve the economic problems to benefit all citizens.

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