Zim’s economic problems: we punish ourselves too
By Nathan Gurira
No matter how determined the Reserve Bank of Zimbabwe (RBZ) is to root out delinquency in the economy, such efforts can fail if other branches of the state do not come to the party.
The RBZ has appointed forex dealers and others who abuse the forex auction system. But the problem persists unabated.
Vice-President Constantino Chiwenga recently fired warning shots against those who supply the parallel market. Addressing the recently concluded Zimbabwe International Trade Fair (ZITF) and the Harare Agricultural Show, Chiwenga threatened to deal with those who are wreaking havoc on the markets.
Shady resellers who charge parallel market rates are large corporations, including local and foreign entrepreneurs who work on infrastructure projects, oil companies, fast moving consumer goods entities, and retailers.
While the public expects the central bank to clean up the mess, the monetary authorities need the support of other public institutions.
Legally, the RBZ operates under the terms of the Reserve Bank Act, Chapter 22:15, the scope of which confines the institution to the maintenance of price stability and the formulation and execution of monetary policy. Its mandate is also to promote a stable financial system.
Apex Bank also administers the Bank Act, Chapter 24:20, and a host of other statutory instruments.
These statutes do not give the bank broad powers to expand beyond certain limits or interfere with the operations of other state institutions.
The autonomy of the bank was ceded to the Treasury during the unity government (2009-13) when the then finance minister, Tendai Biti’s obsession with chopping the wings of the former RBZ governor , Gideon Gono, led to amendments that compromised the independence of the umbrella bank.
The RBZ works in an ecosystem with other regulatory authorities who must play their role in promoting economic stability.
In the energy sector, the RBZ allocated foreign exchange to oil companies to supply part of the fuel in Zimbabwean dollars (ZWL $). Nothing like that happens.
The question that arises is; Where are the officials and inspectors of the Zimbabwe Energy Regulatory Authority (Zera)?
Fuel imported using foreign currency at the official exchange rate is sold in US dollars to troubled citizens paid in ZWL $.
This daily proceeds are then exchanged for Zimbabwean dollars and US dollars at parallel market rates to allow oligopolies to line up for more foreign currency allocations at the auction. The vicious circle continues.
As the Zimbabwean dollar continues to devalue in the parallel market, commodity prices skyrocket, creating an unstable environment.
Not so long ago the cabinet threatened to take tough action against the culprits, but it was blown.
This week, the cabinet released another statement that a technology-based fuel management system, which was developed by the Harare Institute of Technology (HIT), with support from Zera, will be implemented throughout to reduce bad practices in the fuel sector.
Perhaps the starting point would be for the central bank to publish the full list of oil companies affected in foreign currency for the purpose of importing fuel for sale in local currency.
The RBZ would then carry out spot checks with Zera.
For such measures to bear fruit, political will is needed.
In addition, there must be a commitment to flush out the culprits and replace bad apples with professionals.
The police must also fully play their role.
Law enforcement officers should dig past the symptoms and unravel the iceberg.
Parliamentarians must strengthen legal instruments to fight corruption.
No matter how good an economy is, if the authorities allow citizens to do whatever they want, the wheels will definitely go off the rails because greed will anchor the economy.
Fundamentally, the local currency is expected to appreciate as for the first time in many years, Zimbabwe recorded an increase in export earnings of nearly US $ 5 billion, sufficient to meet the needs of the economy. import.
The balance of payments position is healthy, in part helped by strong performance in the mining and agricultural sectors, and the Treasury recorded budget surpluses in the first and second quarters.
Combine fiscal and monetary policy measures with the currency auction system introduced in June of last year to stabilize the economy, the worst should be over by now.
In other words, the positive economic fundamentals achieved so far should have inspired confidence in the Zimbabwean dollar, but the local unit has come under speculative attack for profitability.
In my opinion, the list of institutions failing in their responsibilities includes the tax authorities which for a very long time have struggled to stop leaks at porous entry points.
Therefore, despite the sanctions imposed by the West, the most damaging embargoes are widespread corruption and the rent-seeking behavior of corporations and ruling elites.
- Gurira is an economist. He writes in a personal capacity. – [email protected]