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Noble intentions, questionable prescriptions

Paul Nyakazeya

BEFORE he presented the 2007 mid-term monetary policy on Monday, Reserve Bank of Zimbabwe governor, Gideon Gono, warned that “people should not expect mir

acles” from his prescription to the ailing economy.

Indeed, there were no miracles in the policy to pull Zimbabwe out of the nine-year economic recession caused mainly by bad policies. Although Gono’s intentions were noble, his prescriptions are highly inflationary such that if Zimbabwe was a private company it would suffer historical losses with the institution becoming a burden on its shareholders as all major profit centres have not been performing over the past five years.

Gono reinstated his quasi-fiscal activities (QFAs) which he in January said he was winding up, hence the formation of Fiscorp to mop up such activities. But on Monday he announced his return to QFAs on a much larger scale through support to manufacturers, boosting agricultural commodity prices, gold prices and funding of agricultural production. The inflationary impact of the measures, as has been demonstrated in the past, are obvious.

The latest addition to the broadened QFAs is the Basic Commodities Supply-Side Intervention Facility which is expected to promote a speedy return to normalcy in the supply of basic commodities. The facility is expected to run for nine months.

“As the central bank, our strongest conviction is that Zimbabwe’s inflation and related economic difficulties can be effectively resolved through the active revival of the supply side of the economy, even if it means we subsidise for a while that supply chain in order to jump-start the recovery process,” said Gono.

Ironically, in January he said he was doing away with quasi-fiscal activities which he said caused price distortions.

“These are the unitended consequencies of some of our behaviours as Zimbabweans. They end up imposing a recovery burden or tax on the whole economy and taxpayers through quasi-fiscal interventions,” he added.

He also promised farmers and gold producers a back pay which analyts said was confirmation the money printing machine will not rest in the short-term.

The 2008 local government, parliamentary and presidential elections related expenditures are also going to trigger a further inflation spiral, as more money will be printed during the exercise.

“We call upon all politicians and political parties of all persuasions to always put the interest of Zimbabwe first in their pronouncements and activities,” warned Gono.

“Like any event on the calender, the elections will come and go, but the Zimbabwean economy will remain but either in a better or worse situation as a result of the elections depending on whether the protagonists will take in their hearts and minds the principle of putting Zimbabwe first,” Gono said.

Most of the money that Gono said he would disburse would be printed without any corresponding production of goods and services, at a time when money supply was 17 073,1% for July.

With inflation at 6 952,8% for August, the local currency has become a joke to many Zimbabweans. Streets are littered with discarded bearer’s cheques which nobody seems to be bothered to pick up, reflecting how the currency has lost value.

The monetary policy, which was presented in about two and half hours, was all rhetoric coloured with well-selected vocabulary only good to the ear but bound to hit a political brickwall as demontrated by the reckless mannner in which the Indeginisation and Empowerment Bill was fast-tracked through parliament in total disregard of concerns raised by stakeholders.

Not that the architects do not know their arithmetic, but rather that the proposed measures will not succeed under the present political conditions where government officials have been accused of corruption, and generally lack the vision to extricate the economy from the woods.

“Our situation in Zimbabwe is not only about our economic policies, monetary or otherwise, but also about our politics which is a factor outside the parameters of the central bank governors,” said Gono.

Gono also expressed fears on the possible negative impact of politics on economic development when he warned politicians not to disrupt production in the run up to the 2008 elections by making irrational statements.

While Gono was decrying the effects of the price crackdown launched in July, President Robert Mugabe was telling people at the airport that government would not hesitate to take over companies which were refusing to produce.

“We will take over profiteering businesses if they do not stick to set pricing levels,” Mugabe said.

As politics continues to get in the way of economic logic, Mugabe continues his verbal assault on the West, particularly Britain and America, which he blames for the sanctions imposed on the country.

The sanctions, imposed by Western powers after widespread dispute over the 2002 presidential polls, are mainly targeted at Mugabe and members of his inner circle but have also affected the rest of the economy.

Shops and supermarkets are witnessing scenes reminiscent of the cartoon series Wacky Races as shoppers run to grab products which are in short supply but readly available on the parallel market.

The price madness that prompted the government to introduce controls three months ago has reared its ugly head again as products slowly return to supermarket shelves.

Tills, cash machines and wallets struggle to accommodate the huge bills now needed to purchase basic commodities.

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