GOVERNMENT is losing credibility in its fight to resuscitate the economy as evidenced by the three day national shutdown, which started on Monday, an economist has said.
BY TATIRA ZWINOIRA
Since Monday, the country has been under a national shutdown with business activity ceasing as a form of protesting against the recent fuel price increase that has increased taxes as well as the general rise in worsening economic conditions.
“I think what they have lost is credibility. It is more the intangible things like trust and government reaction to this has not been helpful. They could have used this (national shutdown) as a public relations exercise to say ‘we are now doing the right things to overcome the problems,” economist John Robertson told NewsDay on Tuesday.
“But, if the problems still appear to be there at the end of this exercise, the end of the month and next month that is where the real cost will be in reputation and ability to perform. That is a cost you cannot measure in dollars.”
The fuel increases add to government’s already heavy taxation of its citizenry in a move meant to raise revenue to fund its unsustainable expenditure despite wages in both the public and private sectors remaining stagnant.
“It will reinforce the unwillingness of investors to come but that damage was done way back. It was done at the time of the election and the response to it because many people were waiting for it to make their investment decisions and what happened after the elections greatly discouraged them,” Robertson added.
“I think many people were then invited to wait for the budget and when that came we were told all sorts of problems would be solved … but when the budget came out, there was no evidence at all that anything was going to be improved. So, that is when the trust was lost.”
FEWS NET, a USAid leading provider of information and analysis on food insecurity, in its Zimbabwe Food Security Outlook December 2018 to May 2019 released last month reported the economy is in a dire situation.
This is because the economy has seen widespread increases in the prices of food and non-food commodities since September 2018, driven by inflationary pressure over the growing disparity between electronic and mobile money against available forex.
The result has seen an increase in inflationary pressures with the official year-on-year inflation rate jumping 15,46 percentage points to 20,85% in October 2018 and another 10,16 percentage points to 31,01% in November last year.
But, FEWSNET reported that most local and international independent analysts report much higher inflation rates.
“At the same time, shortages of most basic food commodities like cooking oil, sugar, wheat flour, and bread on the formal markets began in October and continue, especially in remote areas. In late October the government lifted an import ban that was initially imposed in 2016 in order to protect local production and industry,” FEWS NET wrote in a recent report.
“Since the lifting of this ban, there has been increased cross-border activity and inward flow of supplies including cooking oil, wheat flour, rice, and washing soap.”
However, despite the increased border activity, shortages of foreign currency have limited the impact of these efforts leaving the market still battling with high prices.