SOCIAL media was this week awash with messages of prices of basic commodities spiralling out of control, raising real fears of the return in a decade of the hyperinflationary period.
Candid Comment Faith Zaba
While there was gross exaggeration of the rate of the price increases on social media, obviously meant to cause panic in a country whose economy the International Monetary Fund describes as one of the most fragile in the world, there is genuine trepidation about the price increases seen over the past few months. The surges are exerting pressure on an already overburdened citizenry, whose majority is jobless. The country’s unemployment rate is one of the highest in the world, standing at over 95%. There has been a steady rise in the prices of basic commodities, raising concern over the direction the economy is taking. This is being worsened by an economic crisis characterised by a debilitating liquidity crunch, severe cash shortages, a widening budget and trading deficit, fiscal indiscipline, company closures and job losses, among other constraints. The issue in Zimbabwe is not just about continuous price increases, but a deep-seated structural problem. The serious economic imbalances are the root cause of the deteriorating economic environment, which is leading to the price distortions. The increases are a symptom of the deplorable economic mess the country is experiencing.
The fact that the current challenges mirror the 2008 situation, which was marked by critical shortages of basic necessities, foreign currency, unsustainable budget deficits, ballooning debt and high government spending, makes it even more urgent for President Emmerson Mnangagwa and his new cabinet to bring stability to the country.
As pointed out in an interview with the Zimbabwe Independent this week by chairperson of the CEO Africa Roundtable Oswell Binha, the rationing of forex by the Reserve Bank of Zimbabwe and subsequent controls have created inefficiencies in the circulation of hard currency, thereby creating macro-economic mismatches. Government needs to find ways to deal with this urgently before the country is plunged into recurring problems which may land the country back in the hyperinflationary period.
It also needs to implement radical reforms directed at the exchange rate, fiscal deficit, debt-restructuring and the monetary policy. Also on government’s to-do-list should be the implementation of policies designed to reverse de-industrialisation, deal with the high unemployment rate and encourage domestic and foreign investment. The new government should also reduce spending and halt quasi-fiscal activities.
Public debt will by end of year stand at US$14,5 billion, approximately 75% of Gross Domestic Product (GDP), according to official statistics. However, economists say domestic debt could be as high as US$18 billion (93% of GDP) by year end. This is unsustainable. It is the ordinary person who pays for government’s ills, through increased taxes, reduced public services and high inflation. Zanu PF has been given a five-year mandate. They should use it to revive the economy. It is important to stabilise the prices. They owe it to Zimbabweans. But also speculative and profiteering tendencies should also stop.