AS the curtain came down on the year 2019, one could not stop pondering what the future—yes the immediate future—has in store for long-suffering Zimbabweans.
As Econometer Global Capital, we consistently sifted through Zimbabwe’s political economy, attempting to unpack why a country that has so much potential appears to be backsliding.
In our analyses, issues relating to ruinous government policy and confusion emanating from inconsistencies were played out.Another issue that we would validate that appears to have put Zimbabwe on the tenterhooks is the cold war between monetary and fiscal authorities. Put differently, we are of the view that cohesion between pronouncements (which can be interpreted as policy) between finance minister Mthuli Ncube and Reserve Bank of Zimbabwe governor John Mangudya has been minimal.
Ideally, the central bank chief, while he reports to the finance minister, should operate the apex bank independent of his boss. Ncube’s predecessor, Patrick Chinamasa, a lawyer by training, gave Mangudya greater latitude to run the central bank independently. There were consequences, some of which Ncube says he wants to undo.
The increasingly visible policy differences between Ncube and Mangudya have had some results.The outcome has seen policies being quickly reversed, confusing contradictions in public statements and politicians and experts taking sides with either of the two.
The unilateral measures by Treasury which include abolition in June of the decade-old multi-currency system that allowed the use of the greenback and the South African rand within the country, was widely seen as a reflection of lack of amity between the central bank and the finance ministry.
Since the introduction of the bond notes in 2016 which, according to the RBZ, were at par with the US dollar, Mangudya maintained this fallacy in his bid to avoid unsettling the markets.
While removing this parity made a lot of economic sense, it resulted in carnage that authorities are battling with. Many argued that Zimbabwe was not ready to introduce the monetary reforms citing the absence of key fundamentals that can support a domestic currency.
In his 2020 National Budget, Ncube announced that government would scrap subsidies on maize and wheat imports. This move, which dovetails with IMF-prescribed structural adjustment programmes, was expected to push up the price of the staple and cause political instability.
Barely a month after the budget and a few days before the Zanu PF annual conference, President Emmerson Mnangagwa announced that government would subsidise the two agricultural commodities, a development that was seen as a reprieve to consumers. The policy inconsistencies cannot get any worse than this.
For now, Zimbabwe’s economy continues to be hamstrung by rising inflation, foreign currency shortages, high unemployment and rolling power cuts.
Going into the future, we urge monetary and fiscal authorities to harmonise their policy pronouncements and put Zimbabwe first instead of their egos.—Econometer Global Capital.