Persistent fuel shortages, a flourishing foreign-currency black market and empty pharmacy shelves at state hospitals seem to jar with Reserve Bank of Zimbabwe Governor Gideon Gono’s portrayal of the economy.
During his Monetary Policy Statement for the third quarter last week he described the economy as being in the ”spring season characterised by improvements all round”. Economists maintain that the central bank boss has missed most of his targets and that he set the bar too high when he was appointed in December last year.
Targets included bringing inflation down to 200% from a peak of 622,8% in January; strict supervision of the banking sector and the unification of multiple exchange rates to stimulate foreign currency inflows. Inflation is currently at 251%.
A dual interest rate system was introduced to fight inflation. Through this exporters and companies in the productive sector pay 50% interest, up from December’s 30%, while importers and local consumers pay between 261,5% and 271,5%, down from about 920% at the beginning of the year.
”The objective, desire and passion are there to turn around the economy. But his mistake is that he thinks he can do it alone,” said Godfrey Kanyenze, director of the Labour and Economic Development Research Institute.
Gono has managed to coax President Robert Mugabe into agreeing to depreciate the Zimbabwe dollar from $820 to $6 200 to the greenback. He has also restored sanity in the banking sector, albeit at a high cost.
”Dr Gono can — and does — claim to have slowed the inflation rate and brought stability to the exchange rate, but his achievement has been at very considerable cost to exporters, many of whom have downsized their operations and some of whom have closed down,” said economist John Robertson.
A report entitled The State of the Manufacturing Sector released by the Confederation of Zimbabwe Industries shows that about 2 600 jobs will be lost when 25 companies are forced to downsize and eight to shut down.
Gono’s go-it-alone approach and drive for immediate compliance in the banking sector has had dire consequences. Of the country’s 40 banks, 29 have met capital adequacy requirements, two others have three months to reach the desired levels while a further seven banks are under curatorship and two others are under provisional liquidation.
”The financial market was crazy and he has managed to tame it, but at very high cost. He has created panic, bankers are fleeing, and he has chased away brilliant minds,” said Kanyenze.
Unification of the exchange rate is yet to be attained and the Zimbabwean police have been unable to stem the trade in foreign currency on the black market where the greenback fetches at least Z$8 000.
But the central bank governor’s biggest hurdle is his policy variance with Mugabe: they differ on the country’s relationship with international bodies — the International Monetary Fund (IMF) and World Bank; who the country’s major trading partners should be; and how to get the Zimbabwe diaspora to repatriate their earnings. Mugabe wants nothing to do with the ”imperialist” IMF; is looking east for trade partners; and is steadfast in refusing migrant Zimbabweans the vote in return for remitting foreign currency.
Gono, on the other hand, is wooing the IMF and has stepped up repayments to the body from $1,5-million a quarter to $5-million since June; remains focused on the West for trading partners and backs the Homelink initiative — a money transfer system introduced by the central bank for migrant Zimbabweans to channel foreign currency into the country.
”Every one of the economic problems has its origins in political decisions and it is these that have to be attended to … it is political leverage, rather than economic leverage, that should be used to bring the government into line with international standards of acceptability,” said Robertson.