HomeOpinion & AnalysisLettersPolicy inconsistency driving up Zim inflation

Policy inconsistency driving up Zim inflation

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A FORTNIGHT ago President Emmerson Mnangagwa pulled the rug from under the very economy he is trying to revive. Zimbabwe has official inflation of 131,7%. However, economists predict the figure could be far higher.

Economist Steve Hanke puts the figure north of 250%. This is more than double the official rate. According to the Consumer Council of Zimbabwe, a family of six needs $120 835 for basics, to put the effects of the policy inconsistency into perspective. With the average civil servant earning $20 000, there is a massive deficit.

Decreased liquidity

Banks provide working capital for the day to day running of the majority of corporate Zimbabwe. Most suppliers work on a 30 to 90-day credit facility whereby supermarkets get access to products and then pay for the merchandise later. With no line of credit, there has been a shock to the supply chain. A few days after the announcement, companies started issuing Press statements stating their failure to honour pre-standing contracts. Within a week, certain products started disappearing from shelves.

Cooking oil, mealie-meal and sugar have vanished from supermarket shelves. A precedent that echoes the dreaded year 2008 when another policy inconsistency made supermarkets into ghost buildings. Zimbabweans know the signs of a dying economy and remember how tough life became in 2008.

Effect on farming and production

Farmers preparing for the upcoming winter wheat and sugarcane season have been left stranded. Like all people in business, farmers need access to credit for production. The policy inconsistency caught some farmers off guard as they were in the process of finalising their credit facilities.

The industry was not spared either; with no credit, there was no production. Zimbabwean manufacturers have all the odds against them as it is.

This was an event they could do without. When an industry is spooked, it goes into survival mode, and the first to suffer are workers, and retrenchments loom.

Knee-jerk reaction by Zimbabwe leadership

Finance minister Mtuli Ncube and Reserve Bank of Zimbabwe governor John Mangudya have been regarded as complicity in the collapse of the Zimbabwean economy. Much of the problems Zimbabwe faces are a result of policy inconsistency and knee-jerk reactions. Why was the President making a midnight announcement to stop lending, you may ask?

The rate between the US dollar and the Zimbabwe dollar was growing. According to the government, players in the economy were taking cheap credit and buying hard currency on the black market. They would then pay back these loans at a cheaper rate because the Zimdollar is in free-fall. The policy inconsistency increased liquidity of too much Zimdollar on the market was being sighted as the cause of the weakening of the local currency and subsequently leading to inflation. By stopping banks from lending, the government was hoping to cut the source of this cheap credit.

However, this knee-jerk reaction has been likened to shooting oneself in the foot. The action was so drastic like a surgeon chopping off your arm because you have a broken finger. The irony of all this is that in a bid to arrest inflation, the Zimdollar has fallen even further and has taken products off the shelves leaving consumers worse off. This policy inconsistency is wreaking havoc.

With products disappearing off the shelves, the black market has become the source of essential commodities. Cooking oil and sugar that consumers are clamouring for can be found on the black market at double the price. The policy inconsistency has added fuel to the black market. A combo of sugar and cooking oil that was going for US$4,50 before the announcement is now retailing for US$9. This correlates with Hanke’s calculations and puts Zimbabwe at the top of the world’s inflation leaderboard at 256%.

A week later, having seen the effects of their midnight policies, the government has dropped its lending ban. Unlike the announcement made by the President flanked by his Finance minister and RBZ governor, a short Press statement was sent out.

The nature of the Press statement is symbolic of the cataclysmic decision to cut lending in the first place. What boggles the mind is that this announcement did not come sooner. But the damage has already been done; inflation is up, commodities are hard to come by, and businesses are very nervous.

Critics of the government are crying for the abolishment of the current forex auction system. This is all to try to reverse the policy inconsistency. A system that is said to give foreign currency to the connected elite at much lower prices, yet they price their products at black market rates. There is no transparency in the way forex is allocated, and it has been sighted as one of the reasons for rampant inflation.

Final word

The biggest losers in all this are ordinary Zimbabweans. The civil servant earning a poultry $20 000 has been priced out from affording basics. There are widespread shortages in the country, the policy inconsistency and inflation are killing the economy. Calling the current environment a crisis is an understatement. All have lost faith in the economy and Zimbabweans should brace themselves for the tough times ahead fanned by runaway inflation. -The Exchange


Access to healthcare remains a pipe dream in Mat North

POOR equipment, shortage of vital drugs and lack of specialists characterise most of the hospitals in Matabeleland North, with the provincial hospital remaining a pie in the sky.

Villagers are having a torrid time travelling from Binga to St Lukes in Lupane and then Mpilo Hospital in Bulawayo, to give birth when they develop complications.

The road connecting Binga and Dete is in a dire state, full of potholes and rugged surfaces.

On April 11, a Bulawayo bound ambulance overturned near Inyathi coming from Nkayi resulting in the death of  a pregnant mother. The deceased was being referred to Bulawayo after developing complications during childbirth.

Most of the poorly equipped district hospitals in the province lack sophisticated medical equipment to assist people in critical condition.

This has resulted in the province referring its people to Bulawayo.

The central government promised a provincial state-of-the-art hospital to be situated in Lupane 18 years ago.

Years later, there is no meaningful development.

Some politicians believe that the building of the provincial hospital has taken far too long, and worry that it will be used as a campaign gimmick ahead of the 2023 elections.

Besides failure of the government in implementing projects, chief among other reasons for failure to complete the hospital and other projects in Lupane is the politicisation of everything as we head for elections.

The provincial hospital has been in headlines without being completed for far too long. One hopes that maybe next year it will be competed.

The central government says the planned provincial hospital will have 250 beds.

In 2021, the central government allocated $47 million for the construction of Lupane Provincial Hospital.

While Matabeleland North provincial medical director Admire Kuretu says all hope is not lost, he did not give the exact date when it will be opened to the public.

We hope the government will walk the talk on its Lupane Provincial Hospital promise because people are dying due to avoidable deaths. The Citizen Bulletin


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