Emergency recovery measures to stop Zimbabwe economic free-fall

Emergency recovery measures to stop Zimbabwe economic free-fall
Published: 23 October 2018 (299 Views)
This article will be brief and straight to the point. There is no need to continue to pontificate on the political-economy of the country because we all know that after the 30th July elections the economic situation deteriorated fast instead of improving. We do not need a rocket scientist to tell us that market and public confidence collapsed in the post-election period. I will address these legitimacy issues elsewhere. For now please allow me to proffer Solutions to the current economic challenges.

1. Solution to price increases, commodity shortages:

(a*) Gvt should suspend duty on all food stuffs. This will allow retailers and individuals to fill up empty supermarket shelves at competitive prices. Please let us drop the infant industry protectionist mantra. Import substitution is for long term. Here we are looking at emergency measures.

(b*) All prices must be denominated in Rands because they are purchased in Rands. Retailers have been converting rand prices to usd prices on parity. For example a product bought for R60 is sold in Zim for $60 usd. This is arbitrage. What is bought in rands should be sold in rands. Then the country can use USDs to import fuel , electricity and other imports that require forex.

2. Solution to the liquidity crisis

(a*) The bond note must be de-commissioned as it is a surrogate currency. Bad money is chasing good money. The existence of the bond note on parity basis with the USD is driving parallel market rates. This bond is a feeding trough for inflation. It creates inflationary pressures. If gvt still wants to retain the bond i think its better to admit that it is the local currency of the day. In that case, it gvt must come to Parliament to have the bond adopted as the official currency with a floating official exchange rate. In that case the bond note should be availed in the banking system.
 
(b*) De-dollarize and replace the dollar with the Rand as the dominant currency in the multiple currency basket. In other words make the USD a foreign currency unit not a day to day medium of exchange. The wide usage of the Rand can be done de facto or dejure. Joining the Rand Monetary Union would make it de jure. Promoting its wide circulation would make the Rand a de facto currency.

(*d) The usd should be used as foreign currency because the economy does not have the capacity to generate usd money supply. Our major sources of forex are tobacco, gold, diamond, platinum, chrome, horticulture, diaspora, international organizations, foreign direct investment and private commercial loans. But with a debt overhang of usd $17 billion the foreign currency is just not enough to meet domestic and foreign obligations.

(*e) reintroduce foreign exchange bureaus which accept forex trading on a no question basis.

3. Nostro FCA accounts and individual nostro

As long as there is no externalization gvt must continue to promote retention of export earnings to levels that will not compromise the national interests. But for individual FCAs these must liberalized and individuala should be free to withdraw or deposit.

4. Reintroduction of the domestic currency

 should be done on conditions that
- no printing of money and this must be gazetted
- building of reserves for one year import cover
-stopping RBZ overdraft and domestic borrowing
-addressing the budget deficit and trade deficit ( the twin defcit).

It is one thing identifying these preconditions but another to address them. So far all Zimbabweans have chosen to defer implementation of these preconditions hence since 2009 economists have been talking about right fundamentals without doing anything. Zimbabwe must at some stage have its own currency whether we like it or not. But there must be a Covenant against re-igniting hyperinflation by resorting to inflationary financing of the defcit. So the first order of business is to totally get rid of the budget deficit in the first place. Can Zim successfully reintroduce its own currency? The answer is yes we can but it depends. Which leads me to touch on reducing gvt expenditure. Fiscal consolidation is a political issue that requires Leadership. This is where the ruling party has to smell the coffee. Again corruption is a political issue which needs political will and Leadership. The 2 are the babies of the ruling party which should address them head on.

(5)  ADDRESSING PRODUCTIVITY requires new Capital injection and re-engineering of the Manufacturing sector. The agro-processing value chain must be reestablished, esp food processing. The agro-industrial value chain must restored esp engineering, iron, steel, mining. New technologies required. And so are lines of credit for retooling, innovation and adaptation.

(6) Investment Facilitation. This is key and requires no elaboration. Zimbabwe must be the choice for investors. We must improve our incentives and investment climate. Ease of doing business must be expedited. Practical reforns are required beyond rhetoric.

7. Re-engagement is necessary to clear our debts and unlock new money. But the language must change. In the gvt there are spoilers who should not be allowed to open their mouths. They are spoilers.

CONCLUSION

I bet you if this government listens and adopt even half of these measures, Zimbabwe can stop the current free fall and start to recover provided economic reforms are accompanied by the deepening of democracy and good governance.

- Dr Tapiwa Mashakada

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

Knox Mutizwa wins August Goal of the Month award

by kickoff | 05 November 2018 | 1029 Views

BREAKING: Gandawa on the run

by Staff reporter | 05 November 2018 | 1979 Views

Econet cannot distribute Kwese TV content to Zimbabwean viewers

by Staff reporter | 05 November 2018 | 1510 Views

Shoot-out robbers arrested

by Staff reporter | 05 November 2018 | 1523 Views

Mnangagwa ally warns economic saboteurs

by Staff reporter | 05 November 2018 | 1473 Views

Chamisa mobilises supporters for mass protests

by Staff reporter | 05 November 2018 | 1258 Views

LISTEN: Acie Lumumba speaks on how he got paid

by Staff Reporter | 05 November 2018 | 1040 Views

Dzamara speak on Zanu-PF fights

by Mandla Ndlovu | 05 November 2018 | 1007 Views

Minister Raj Modi Modi donates salary

by Mandla Ndlovu | 05 November 2018 | 859 Views

'I am a Trillionaire' Magaya says

by Mandla Ndlovu | 05 November 2018 | 1377 Views

Supermarkets to be blacklisted over cooking oil

by Mandla Ndlovu | 05 November 2018 | 823 Views

UK army to recruit from Commonwealth

by BBC | 05 November 2018 | 918 Views

Magaya opens up on arrest

by Mandla Ndlovu | 05 November 2018 | 926 Views

Kambarami is still 'Deputy Mayor'

by Mandla Ndlovu | 05 November 2018 | 767 Views

'Import ban must not go beyond December 21'

by Staff reporter | 05 November 2018 | 849 Views

Prophet Magaya puts fresh spin to arrest

by Staff reporter | 05 November 2018 | 878 Views

Chamisa's sign language interpreters get thumps up

by Staff reporter | 05 November 2018 | 863 Views

Mnangagwa to review Mthuli Ncube's 2% tax again

by Staff reporter | 05 November 2018 | 829 Views

Lumumba to be probed by ZAAC?

by Staff reporter | 05 November 2018 | 606 Views

Dzamara speak on ZANU PF fights

by Mandla Ndlovu | 05 November 2018 | 574 Views

Zimbabwe as a new gateway into Africa

by Minister of Finance Prof Mthuli Ncube | 05 November 2018 | 846 Views

Chiwenga's ex-wife looted millions

by Mandla Ndlovu | 05 November 2018 | 1231 Views

We are our own worst enemies

by Mapozho Saruchera | 05 November 2018 | 892 Views

Mnangagwa to deal with unexplained wealth and bank deposits

by Staff reporter | 05 November 2018 | 810 Views

WATCH: Chiwenga talks about Prophet Walter Magaya's lipstick

by Staff reporter | 05 November 2018 | 802 Views

Lumumba Saga takes new twist....War vets bay for Mutsvangwa's blood

by Mandla Ndlovu | 05 November 2018 | 869 Views

Chamisa demands Presidency

by Mandla Ndlovu | 05 November 2018 | 758 Views

Zimbabwean teachers miss out on New Zealand opportunity

by Staff Writer | 05 November 2018 | 704 Views

Zimbabwe to introduce e-provisional driver's exams

by Staff reporter | 05 November 2018 | 750 Views

Zimbabwe to supply water to South Africa

by Staff reporter | 05 November 2018 | 748 Views

Mnangagwa claims that 'good times will soon roll'

by Staff reporter | 05 November 2018 | 713 Views

Zimbabwe as a new gateway into Africa

by Hon. Prof Mthuli Ncube | 05 November 2018 | 842 Views

Chiyangwa appoint Karikoga Kaseke

by Staff reporter | 05 November 2018 | 714 Views

ZCTU demo: Ruling today

by Staff reporter | 05 November 2018 | 665 Views

Missing cop found dead

by Staff reporter | 05 November 2018 | 809 Views

Tagwirei marries long-time girlfriend

by Staff reporter | 05 November 2018 | 1259 Views

Zimbabwe relaxes maternity leave entitlement

by Staff reporter | 05 November 2018 | 774 Views

Zimbabwe to receive drugs, ambulances from India

by Staff reporter | 05 November 2018 | 697 Views