FAILURE by government to address the unrelenting currency crisis has come back to haunt the country as evidenced by widespread unrest triggered by the rising cost of living.
BY KUDZAI KUWAZA
Finance minister Mthuli Ncube’s maiden budget statement, presented under the theme ‘‘Austerity for Prosperity” in November last year, introduced a number of cost-saving measures such as the slashing of salaries of senior government officials by 5%, the retirement of more than 2 000 youth officers and the reduction of foreign embassies. He was, however, silent on measures to address currency volatility which has wreaked havoc on the economy.
Ncube indicated that he left currency reforms untouched because he wanted to first fix macro-economic fundamentals and critical issues like the budget and current account deficits, money supply and inflation through austerity measures and fiscal consolidation before tackling the currency crisis.
“We only need to do currency reforms when (economic) fundamentals are strong. This means the budget deficit should be under control, current account deficit is under control, inflation is under control, and so forth,” Ncube said. “So this is the roadmap.”
However, Ncube’s remarks in the budget that the United States dollar remains at 1:1 to Real Time Gross Settlements (RTGS) and bond notes despite announcing measures that are contrary to that notion have had devastating repercussions for not only business, but also for the economy at large.
The failure to address the currency crisis, which worsened after the Reserve Bank of Zimbabwe (RBZ) announced the separation of RTGS and forex accounts on October 1 last year, has resulted in the depreciation of the value of the local currency, as well as the shortage and skyrocketing of prices of basic commodities. It has also seriously eroded the salaries of the majority of Zimbabweans who are paid in RTGS and bond notes.
This also resulted in a crippling 40-day strike by doctors, which ended yesterday. The doctors had listed payment in US dollars as one of their demands to go back to work which the government baulked at. The strike, which threw the health sector into turmoil and endangered the lives of thousands of patients, forced President Emmerson Mnangagwa to abort his annual leave after Acting President Constantino Chiwenga failed to resolve the impasse.
Government held a meeting with its restive workforce this week in a desperate bid to avert a strike over salaries.
Government revealed that it had an offer ready for civil servants that will be tabled at the National Joint Negotiating Council. Teachers, like doctors, also want to be paid in the greenback or at least $3 000 in the surrogate bond currency.
The failure by government to address the currency crisis has put it in fire-fighting mode. This is evidenced by the panic created by the decision by beverage giant Delta Corporation to price its products in foreign currency. “In order to sustain our operations, the company advises the retail and wholesale customers that its products will be charged in hard currency with effect from Friday January 4, 2019,” part of the circular by Delta management read.
“The new fiscal and monetary policy framework in place since October 2018 does not provide for easy access to foreign currency by non-exporters. The company has only received limited foreign currency allocations from banking channels, which have not been adequate to fund the import requirements.”
This resulted in government hastily arranging a meeting with Delta management. The beverage manufacturer rescinded its decision to sell in forex after receiving assurances from the central bank that the listed company will receive adequate foreign currency allocations for its operations.
Government’s efforts to address the current economic decline will remain futile as long as it does not address the issue of currency reforms, according to business consultant Simon Kayereka.
“The government can skip around issues but what is needed are currency reforms,” Kayereka said.
“Without currency reforms, 2019 is going to be a very tough year.”
Kayereka’s fears that the year will be difficult are not without foundation as evidenced by the continued shortage of fuel which has resulted in long winding queues at service stations countrywide as a result of government’s inability to address the currency conundrum.
Motorists are spending several hours queueing for either diesel or petrol. An increasing number of fuel stations are now selling fuel in the greenback with others rejecting payment in RTGS and swipe. This has resulted in the hike in public transport fares — in some cases threefold — further whittling the disposable income of the commuting public.
The currency crisis has resulted in drugs being sold in foreign currency at pharmacies or in the RTGS/bond equivalent, a pricing structure which has made life-saving drugs unaffordable to the majority of Zimbabweans.
The fiction that the local currency is equal to the Unites States dollar has also rendered useless medical aid cards as the prices of medicines have rocketed beyond the reach of medical aid societies.
Government has failed to instill confidence through its continued failure to address the currency crisis, according to economist John Robertson.
“The confidence needed to make the forex stay in the country or to bring it in the country has not been created by government,” Robertson noted. “It is hard to predict what happens next.”
He said 2019 will be a difficult year with no solution to the currency crisis giving rise to a rising tide of anger by the generality of the population.