AS the year 2019 comes to an end, it is important as a nation to reflect and take stock of the struggles and accomplishments over the last 12 months.
It was a difficult year as the country experienced its worst natural disasters — Cyclone Idai and a drought — which compounded the economic crisis characterised by power cuts of up to 18 hours daily, acute foreign currency shortages and runaway inflation which is now over 400%. The year got off to a horrendous start, as the economy rapidly deteriorated, amid social upheaval. Zimbabwe’s human rights record was under the spotlight this year after 17 civilians were shot and killed in January by the military and police during protests against a 150% hike of fuel.
The government’s continued reluctance to address currency reforms, as well as maintaining the fallacy that the local unit was at par with the greenback spawned a multi-faceted national crisis characterised by increased cost of living, shortage of fuel and failure by companies to reopen after the 2018 Christmas holidays.
The depreciation of the local unit to the United States dollar resulted in the skyrocketing of prices of goods and services, decimating the disposable income of the majority of Zimbabweans. Compounding the situation is that the country is slowly redollarising. The exchange rate, which was ZW$2,50 on February 21, is now above 22 on the parallel market and 16 on the interbank market. The promised stability in the exchange rate has not materialised, leading to the market losing confidence in the prematurely reintroduced Zimbabwean dollar.
Year-on-year inflation was forecast to end the year at below 10%, according to the Transitional Stabilisation Programme (TSP) by Finance minister Mthuli Ncube. Inflation is now expected to close the year at above 440%. From January up to the end of October, the Consumer Price Index moved up by 409%, meaning the purchasing power has been eroded fourfold. This is all happening when wages and salaries have remained stagnant. A person who earned US$500 in January, the average salary earned by the majority of workers, now earns US$31 at interbank rate. Businesses are reeling from a drastically eroded aggregate demand. Bellwethers like Delta have reported drastic reduction in the volumes of sales.
Power outages are now the norm, dampening capacity utilisation and raising the costs of doing business. These facts indicate to a massive decline in the 2019 real GDP, with the official real GDP decline of 6,5% looking increasingly conservative. Fiscal indiscipline reared its ugly head again, despite the talk of austerity and fiscal consolidation. Broad money supply has increased by over a massive 80%.
On social services, the health system has virtually become a death trap with the public service delivery virtually at a standstill after the year was marked by industrial action of more than three months by health professionals, including specialist doctors. The sanctity of life is no longer pricking the conscience of the politicians – the vulnerable are being sacrificed as collateral damage. The situation is getting worse in the pharmaceutical sector, where most drugs are pegged at the United States dollar, which has made it unaffordable to most Zimbabweans putting their lives in danger.
While it was a disastrous year as evidenced by the state of the economy and collapsing social systems, the setting up of the long-awaited Monetary Policy Committee (MPC), filled with qualified and experienced individuals has been a plus. In order to foster transparency, a statement is issued on the deliberations of the MPC.
The establishment of the interbank foreign currency market provided an alternative market for forex trading. It is far from being perfect though due to its opaqueness. Each bank is negotiating its own rate, making it impossible to have a true single reference rate. The move to introduce a Reuter’s system for forex trades has good intentions. However, it does not address the major challenge of constrained forex supply.
The removal of the forced 1:1 parity between the RTGS dollar and the greenback helped to show that the RTGS$/ZW$ was highly overvalued. The coming together of Zimbabweans to assist the victims of Cyclone Idai showed the massive potential of Zimbabweans to solve their problems.
The launch of the International Monetary Fund Staff-Monitored Programme is commendable. It provides an alternative credible avenue of accountability for government on its economic reforms. A credible body such as the IMF will allow us to see the accurate state of affairs in terms of economic reforms.
The year 2020 has to be different.