It is going to be much more of the same. We are going to have a very difficult agricultural season due to a number of factors especially the high input costs and exchange rates.
DEEP-SEATED economic problems that characterised 2018 are likely to persist if the government does not implement far-reaching reforms to address the multifaceted crisis.
By Melody Chikono
At the heart of Zimbabwe’s economic problems in 2018 were an unsustainable budget deficit of US$2,9 billion, excessive government borrowing from the Reserve Bank of Zimbabwe, beyond the stipulated 20% threshold of revenue collected in the previous year and the unsustainable issuance of statutory paper, whose maturity this year is expected to soar to US$2,2 billion.
Last year, the country held its first election without former president Robert Mugabe as a candidate after he was toppled through a military coup which resulted in the ascendence of Emmerson Mnangagwa to power.
Measures around establishing the real value of the US dollar against the bond note saw the exchange rate reaching an all-time high of $600 (bonds) for a US$100 which pushed up the cost of living as prices more than trebled.
Economists, business leaders and labour activists agree that the economic challenges that characterised the economy in 2018 will escalate in 2019, though any changes would hinge around the leadership’s resolve to map a way forward and implement economic stabilisation measures.
This comes as the country has been battling a 40-day doctors’ strike which ended yesterday.
On the other hand, the entire civil service under the Apex Council on Tuesday issued a notice to go on strike within the next two weeks, citing the collapse of negotiations in the wake of grossly eroded salaries.
There is also a worsening situation with fuel supplies in the country, which has seen transport fares doubling, further eroding the income values.
While the cost of living has reached unsustainable levels with the Consumer Council of Zimbabwe (CCZ) saying it stood at US$697 in November 2018, president of the Zimbabwe Congress of Trade Unions (ZCTU) Peter Mutasa said the statistic was manipulated and CCZ was not being truthful as people were living in abject poverty.
Prices of basic commodities shot up over 100% in October, rendering incomes worthless.
Mutasa argues that, at this rate, companies that closed in 2018 are unlikely to open owing to tough economic challenges while some schools will have low enrolment as people will not be affording the fees.
“Our view is that we are in a big crisis and there is an urgent need for stakeholders to sit down to address the issues we are faced with or we will go back to 2008. Some schools won’t be able to open as fees will be beyond the reach of many, some companies that closed in 2018 will not be opening In 2019 as they are faced with distress which started when government introduced the 2% tax and the devaluation of the dollar.
The agricultural season will not be so good due to the Elnino and the rain and will have ripple effects on the economic performance. We are going through eruption and we are likely to see civil strikes and demos leading to instability,” he said.
Mutasa further pointed out that it was business as usual for the leadership while reality on the ground was that the country was in deep crisis.
He painted a gloomy picture of 2019, stating that the situation was likely to worsen.
“We do not have leadership, the country is in a mess. We are coming from a strategic meeting where we have been mandated to lead people to demand change of policy from government; we have been mandated to make sure people not accept to regress into 2008,” he said.
“We need stakeholder engagement and the leadership should exercise sober leadership. This is the sentiment of business as our members are coming from these companies and the business sector at large.
“We have seen mortgages destroyed and people are no longer able to buy properties or a stand, hire purchase was destroyed so we demand leadership.”
Economist Eddie Cross said 2019 will be pretty much the same as 2018 if no policy changes are implemented particularly on exchange rates and the Reserve Bank of Zimbabwe.
“It is going to be much more of the same. We are going to have a very difficult agricultural season due to a number of factors especially the high input costs and exchange rates. The mining industry is also struggling with exchange rate impacting on their production. So we really need significant policy changes in particular on exchange rates and RBZ otherwise 2019 is going to be very difficult,” he said.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe stated that the answer to a better 2019 was the implementation of the announced measures in the economic stabilisation plan (TSP) that it launched as well as austerity measures highlighted in the 2019 budget.
He added that it was imperative to the disparities between the value of the bond currency and the greenback.
Finance Minister Professor Mthuli Ncube in November announced a cocktail of austerity measures to contain government’s unrestrained expenditure outlays and resultant fiscal deficit seen surging towards US$2,9 billion this year-end in a bid to extricate the country from a worsening fiscal crisis.
“We are little happy with the budget presentation made in November which particularly presented austerity measures meant to stabilise the economy. We then need to address the issue of currency and ascertain the debate around the true value of the RTGS and the bond notes. We need mechanism around that to be able to access raw materials. If government address these issues we will have a more stable take off in 2019 we have seen the exchange rate is now stable but still very high. We need to be moving towards stabilising the economy in line with the TSP. In short government now needs to implement these measures if not 2019 will remain the same as 2019,” he said
Another local economist, Clemence Machadu said the key expectation for 2019 would be for government to change its culture of discipline and start walking the talk when it comes to budget pledges, particularly on fiscal prudence.
“Over the years we had brilliant ideas that never saw the light of the day due to lack of political will. The year 2019 will therefore be litmus test for the second republic to prove beyond any shadow of doubt that it is really serious about its budget commitments to turnaround the economy and set it for major uplift,” he said.