Unions reject Gono’s social contract-(08-02-07

HARARE - Zimbabwe is gearing up for the imposition of price controls "on all commodities, goods and services, produced wholly or substantially". Price and wage restraint is part of a social contract the Reserve Bank hopes will be adopted by labour unions and employer

It is part of a new populist strategy RBZ governor Gideon Gono hopes will enable President Robert Mugabe to win back the support of millions of Zimbabweans reeling from a deepening economic crisis many blame on the octagenarian’s 27-year rule.
Since the announcement of the monetary policy statement by Gono last week Wednesday, in which the social contract was announced, some aspects of the plan are already in place and others are taking shape.
Interest rates have been so set that the yield on money market instruments is at least 45 percentage points below the inflation rate of 1,281 percent. Bank lending rates are also hugely negative and the government is trying to finance its growing domestic debt by issuing five-year government loan stock at an interest rate of about 500 per cent – or less than half the inflation rate.
The social contract that Gono hopes will save Zimbabwe’s crisis-torn economy includes doubling minimum pay for urban employees, while imposing price controls on basic items. These include the staple food, maize meal, cooking oil, bread, flour, milk, meat and paraffin. Bus fares, rents and water charges are also listed for a form of “price restraint”.
Despite these populist measures, the trade unions have rejected the contract, while employers make little secret of their opposition to a plan they say cannot work.
The government’s part of the bargain is to cut inflation to three digit figures within the time-frame of the accord, or by June, to cut the budget deficit, and to “continually introduce tax incentives – especially for exports – and boost disposable incomes”.
Political analysts describe the social contract as part of the government’s wider plan to mollify a restive nation angered by a deepening economic crisis. Few believe the ploy will work.

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