Failure is the only option: An MDC perspective of the RBZ’s monetary policy statement (31-01-07

On 18 December 2003, the RBZ governor Gideon Gono gave his maiden monetary policy statem

ent in which he outlined his five-year vision to December 2008.

In that statement, Gono foresaw “the attainment of a stable and prosperous Zimbabwe, a jewel of Africa with a Central Bank that will guarantee foreign reserves of above six-months import cover and with inflation levels reduced to a single digit band of between 5-9 percent.” Over and above this, Gono foresaw a Zimbabwe with a single economy free of distortions, with fiscal discpiline and tight monetary policy measures, an economy able to sustain itself in terms of food requirements and other imports, a Zimbabwe with cordial relations with key international donors and capital markets and a Zimbabwe that is able to meet its commitments timeously.

Exactly 1 139 days later, Gono presented his latest monetary statement in which it is quite clear that his original vision was a mirage. If anything, the country’s economic and social circumstances have shrunk to levels that Gono himself would never have dreamt of even in his most pessimistic mood. Put simply, it is quite clear that the governor has failed.

We have always made it clear that the precondition to Zimbabwe’s economic recovery is a decisive solution to issues of legitimacy and governance that have arrested this country since the stolen Parliamentary election of 2000 and the stolen Presidential election of March 2002. Without a resolution of the political question, including issues of a new Constitution with free and fair elections under the same, the economic question will remain but a question. And failure remains the only option.

A political solution will pave way for a sustainable programme of reconstruction, economic transformation and stabilisation. At the core of this reconstruction must be the understanding that this country has experienced 10 years of economic decline, a shrinkage that is unmatched even in countries that have engaged in full-scale wars. The decline has seen massive starvation of the Zimbabwean people of every social and economic index.For example, the World Health Organisation reports that the mortality rate per every 100 000 live births has risen to 10 000, the death rate per 1 000 people has risen to 23,4 percent, life expectancy is down to 36 years while the government has acknowledged that by 2006, an average of 4 000 people were being buried in Zimbabwe every week.

In his latest statement, Gono acknowledges the need for a holistic solution to the Zimbabwean crisis and the inadequacy of what he calls “a single policy prescription” based on manipulation of traditional monetary policy tools of interest rates and the exchange rate. Indeed, he acknowledges the fallacy of the status quo and what he calls “a fragmented and seemingly knee-jerk half-hearted approach”, coupled with lack of commitment from social partners in the reconstruction journey.

In failing to ackowledge the centrality of issues of governance and legitimacy to the Zimbabwean crisis, Gono is being mendacious. This may be forgivable but is not acceptable. What is not forgivable, however, is for Gono to yet again present himself to hard-pressed Zimbabweans pretending that he is offering a solution, or that he is not part of the problem. Like Herbert Murerwa’s budget statement of 1 December 2006, or Rugare Gumbo’s NEDPP of March 2006, the latest monetary statement doe not offer any solution, half baked or otherwise, to the Zimbabwean crisis. Like everything associated with this regime, the lack of acknowledgement of corruption and rent-seeking activities by Zanu PF charlatans is obscurantist.

To suggest, for instance, a Social Contract under a situation of hyperinflation is unscientific and unrealistic. How can workers be asked, within the framework of a social contract, to forego wage and salary increases when economically they are subjected to a parallel market world with rampant price increases that the government cannot and will never be able to control.

At the core of the Zimbabwean crisis is the crippled supply side of the economy. Put simply, we are not producing. The scenario of non-existent supply creates fertile ground for middle men and the rule of rent-seking activities. These are the distortions that the governor himself has outlined in his latest statement. These distortions and dislocations include maize price distortions, fuel price distortions arising out of the two-tier pricing system as well as distortions around prices of electricity, fertiliser and international call charges. What Gono does not mention is that the key drivers of these vampire activities in the economy are the Zanu PF elites, who apart from the distortions he mentions, have been buying foreign currency from the RBZ at the official exchange rate and putting it to maximum use in the parallel shadow economy.

The net result has been the creation of a small rich elite of less that 1 percent of the population that is controlling 80 percent of the economy. The gap between the rich and the poor has been one of the sharpest in the world. As the poor have become poorer, the conspicuous consumption of the rich has become obscene. That is why in any economy like this, some can buy luxury vehicles of hundreds of thousands of United States dollars!

Gono’s refusal to devalue is political grandstanding and a product of Dutch courage. Whether the government likes it or not, he is going to devalue in 2007, and devalue big time. This is elementary economics. The Zimbabwean dollar cannot maintain an artificial value which is not supported by significant exports.

Of further concern is the continuous misadventures of Gono in fiscal activities despite the rapping in the knuckles by Murerwa in 2006. The governor’s involvement in quasi-fiscal activities, despite his protestations to the contrary, is the mindframe of a man who sees himself as being in charge of the country; the de facto Prime Minister. Sadly for Zimbabweans, the prince has set his sight on the throne. But if he cannot manage as elementary a thing as a monetary policy, what more the nation state?

We have said it before and we shall say it again. Zanu PF and its three centres of power along Samora Machel Avenue are tired and devoid of any solution to the multi-layered crisis facing the country. Change is as inevitable as it is long overdue in this country.

As we have said before, to Save Zimbabwe, the solution to the national crisis can only be possible if all political parties and stakeholders put their heads together and hammer out a lasting solution to the crisis.

The national crisis is now beyond Zanu PF’s ability to attend to alone. Zanu PF no longer has any solutions to our woes. The solution lies in our proposals, enunciated through our roadmap whose signposts for progress require sincere dialogue, a nationally accepted transitional arrangement, a new Constitution, a confidence-building window and a free and fair election.

Hon Tendai Biti, MP

MDC Secretary-General

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