Time to go back to Plan A
THE US$2,5 billion which government said it would raise under the National Economic Development Priority Programme remains elusive. Save for last week’s announcement that the country had secured lines of
credit amounting to US$490 million, there is scant evidence that this economy has received such a large forex injection.
If anything, there are all the indications of a further deterioration in the forex situation as companies threaten closure or retrenchments to cope with their invidious positions. Four months into the NEDPP the economy is nowhere near on the mend because the key objectives of the programme remain a pipedream.
At its inception in May, government said the NEDPP was a quick-fix plan to raise forex, reduce inflation and to stabilise the currency. Sceptics were understandably quick to dismiss NEDPP as another leap of faith because fundamentals on the ground militated against positive change, especially the risk posed by the intractable political situation.
That view is still relevant today. With two months to go before the conclusion of the programme, the picture of our economy remains bleak, especially following the announcement last Friday that inflation had risen to 1 204%. Worse still, the IMF last week said annual inflation could reach 4 000% by the end of 2007. This is too scary to contemplate considering government’s own projections.
No amount of pontificating on “strides” made to date will airbrush away the crisis. Events of the past month torpedo assertions that the economy is on the mend. We are unfortunately beginning to see symptoms of a very sick economy in which basic infrastructure and services, requisite for the efficient running of industry and commerce, are collapsing.
This week internet service providers issued a statement attributing the serious disruption in internet traffic to Net*One’s failure to pay US$700 000 to Intelsat, the company which provides the connectivity to outgoing bandwidth to the World Wide Web as well as for email traffic.
Net*One this week said its SOS to the Reserve Bank had not helped. The central bank does not have the forex. But it has splurged billions of dollars in foreign currency to purchase 304 vehicles that were used in Project Sunrise. This is a government that wants to be taken seriously!
There is a serious water crisis in the capital and the situation is worse in Bulawayo as the local authorities battle to secure foreign currency to purchase chemicals and equipment to keep their water reticulation systems running.
The perennial problem of fuel has taken a turn for the worse with virtually all service stations in Harare drying up. This is despite announcements of fuel deals and lines of credit having been secured under the NEDPP.
Electricity problems are far from over, so are the dangers on the country’s antiquated railways network.
Meanwhile, industry is groaning under the weight of foreign currency shortages and government’s new zest to control prices. Bata Shoe Company, one of the largest employers in the Midlands, has made representations to the political leadership seeking foreign currency to remain operational. Failure to avail the foreign currency will result in massive retrenchments.
The story at Bata resonates throughout the manufacturing sector. Monetary policy interventions allowing exporters to retain foreign currency in their FCAs for as long as they wish have backfired.
Zimbabwe’s problem is that it is not producing enough goods and services. The same is true of agriculture which is supposed to drive this economy. Because of low production in the sector Zimbabwe will continue to import maize and with it imported inflation.
The current state of the economy four months into NEDPP does not give much hope to business and consumers. The next two months to November are not expected to bring positive change as inflation is forecast to continue marching north while the local currency is not near any state of stability.
What has become very clear is that the central bank governor is neither a miracle worker nor is the NEDPP a miracle cure for our woes. When wonder cures fail, there is always the chance to fall back on conventional therapy which is what Zimbabwe needs today — a comprehensive recovery plan underpinned by political reform and international engagement.