Wake-up call from delusional dreams
THE International Monetary Fund (IMF) team which was in the country last month has painted a grim picture of the Zimbabwean economy. The immediate future does not look anything like the bright sunny uplands we have been promised by th
ose in power. The IMF staff mission statement released this week not only demonstrates the continued free-fall of our economy but is a significant assault upon the integrity of budgetary projections by both Finance minister Herbert Murerwa last year and of Reserve Bank governor Gideon Gono who as recently as May claimed the economy was turning a corner.
The IMF said Gono’s policies of consumer subsidies will fuel inflation. Output is expected to decline further. Murerwa’s 28% growth projection for agriculture and 3% in GDP are now revealed to be mere mirages — which is what we said at the time of his budget. Even Gono’s revised GDP target of 2-2,5% is unlikely to be achieved.
The IMF said foreign currency shortages were expected to intensify and the budget deficit will likely bloat.
The picture presented by the IMF is very different from the Nirvana we were promised in the pre-election period. And Operation Murambatsvina will simply compound existing problems, the Washington bankers say.
The government stratagem at the time needed a well-scrubbed and unsullied face to stage the “turnaround” plan. Gono was the answer. We warned Gono at the time that he was being invited to a political mangling in which his person would be used to authenticate the Zanu PF fantasy that glory days were nigh. The governor, as energetic as ever, has stuck to his guns albeit in the face of mounting problems. His credibility is at stake.
“Failure is not an option” has been the rallying point of his thrust against inflation, corruption and low productivity in the manufacturing and agricultural sectors. But will this be his swansong? In May, Gono was forced to revise his inflation forecasts from the initial target of 30-50% to 50-80% by year-end. His policy has suffered major losses on this front and even the revised targets do not look realistic seeing as the cost of virtually everything has gone up.
Gono in May unveiled hugely subsidised financing packages for the agricultural sector and for exporters. This the IMF has said will “fuel a sharp increase in money supply, and hence inflation”, ironically his number one enemy.
There are other inflationary pressures. Fuel went up by 300%, school fees from $500 to $500 000 a term (no need to calculate the percentage increase here) and rentals have shot up by at least 300%.
The cost of all basket goods has also soared sharply together with phone charges and medication. No amount of manipulation of statistics can mask the fact that inflation is fast heading north and is set to breach the 200% mark by year-end. Politicians’ overzealous war cries of recovery suddenly went silent after the election, leaving Gono as the lone crusader. He is now exposed and all attention is on him. The people want him to explain the crippling fuel shortage, the rising prices of groceries, the shortage of bank notes and rocketing inflation.
The problems sit snugly on his lap while politicians are now busy executing Operation Murambatsvina, a smart sideshow which has left the economy smarting even more. The IMF has said the operation “threatens to worsen shortages and contribute to lower growth, and aggravate inflation pressures”. It is a question of the government pretending to be solving a problem when in fact it is hurting the economy with every move.
The IMF is of the belief that the problems bedevilling the economy stem from lack of a comprehensive plan to tighten monetary policy and lower the fiscal deficit. The IMF says steps should be taken to introduce a unified, market-determined exchange rate. There should also be structural reforms to remove price controls and restore private sector confidence.
This means Gono’s voluminous monetary policy documents and the government’s economic plans are not working and our authorities should stop pretending that they are.
The IMF statement is a serious indictment of those claiming to run this economy.
Like the IMF, we have always maintained that there cannot be a recovery so long as Zimbabwe remains a pariah state in the community of nations. But our rulers seem to enjoy this rogue reputation and are quick to justify their every obtuse move.
We face expulsion from the IMF and the consequences will be dire for the country. This does not appear to prod President Mugabe and his team to wake up from the delusional dream that no one can run this country better than them.
“A rebuilding of relations with the international community is a critical part of the effort to reverse the economic decline,” the IMF says. But is anyone listening amid the ruckus of Operation Murambatsvina?