WEAK policy architecture and failure to institute timely economic reforms have led to the erosion of confidence in the country’s financial system, a top government official has said.
By Melody Chikono
Chief director for fiscal policy and advisory services in the Ministry of Finance Pfungwa Kunaka was responding to questions on why the reforms were failing to bear fruit during the Zimbabwe Association of Pension Funds (ZAPF) 44th annual congress in Victoria Falls.
“We are all concerned about the erosion of value of assets dating back from 2009 … we have had the commission of inquiry whose recommendations we are working on. This has led to loss of confidence in the system, but it all goes back to overall policy architecture and behaviour that comes with it,” Kunaka said. “We should implement that which we said we would. We put in the reform agenda last year, but we were hit by a wave of shocks dampening trust and confidence along the way. We then brought in the next of reforms but I’m saying we need to reinforce that which we seek to reinforce.”
Government has planned a raft of reforms aimed at economic stability, but have unfortunately resulted in a wave of increases of prices of basic commodities.
While Kunaka conceded that the austerity measures inflicted pain on the people, he said the country needed to implement reforms, adding that a sustainable economy can only be achieved if the private sector moves away from the present “business as usual” approach.
Meanwhile, World Bank country manager Mukami Kariuki told businessdigest that reforms aimed at addressing macro-economic imbalances and enhancing opportunities for private sector-led growth were critical for curbing inflation.
While she said govement had laid a good foundation on the Transitional Stabilisation Programme, she said its implementation would determine its success.
Kauriki further advised government to enhance the credibility of fiscal policy, predictability of monetary policy as well as reducing government involvement in productive sectors.
“In line with the SMP (Staff-Monitored Programme), the government has already made steps to strengthen fiscal discipline by containing public sector wage bill and overdrafts from the central bnk. Yet, prices continue to increase, driven by exchange rate movements,” Kauriki said.
“Further efforts to enhance the credibility of fiscal policy (public finance management and transparency) and predictability of monetary policy (roadmap for currency reform), as well as reducing government involvement in productive sectors are likely to support government’s fiscal adjustment programme. This programme will also need to include measures to mitigate the impact of negative fiscal adjustment and economic shocks on the poor. Greater competition can also have a cooling effect on prices and that is why it is important that the government presses forward with reforms that improve the environment for doing business and investment.”
She added that the Zimbabwean government has laid a good foundation in the Transitional Stabilisation Plan and its implementation will be critical to succeeding in this regard.”