Finance and Economic Development Minister Mthuli Ncube is in Davos at the World Economic Forum, and as expected he is selling Brand Zimbabwe, projecting that he will bring down inflation from 42% to 10% by next year, and find money to cover foreign debt payments of $1,2 billion, while introducing a new currency in “less than 12 months”.
If what the renowned economist is saying is true, then the country is headed for good times and there are no better remedies than what Ncube suggests, considering the austerity measures he has introduced back home. Ncube, a former vice chairman of the African Development Bank, is on the record as having said he was going to cut down government expenditure, in particular downsizing the civil service. He has also said he would re-engage international financiers such as the IMF and the World Bank and clear Zimbabwe arrears with the two bodies.
While we appreciate the spirited efforts by the Treasury chief, we want to remind him (as we have said it before) that Zimbabweans want results not pontifications. What is obtaining on the ground so far does not bring joy at all, especially to the over-burdened consumers.
This is the same man who told us soon after he was sworn in, in September last year, that he would phase out the bond note before the end of 2018, but decided to turn right while indicating left when the time came. We will not delve into that because that is water under the bridge because the timelines were not met.
For now, we will dwell on what is happening in Davos. The Finance Minister should be aware that he is representing a country that has a suffering economy which needs urgent surgery to resuscitate it. Therefore, the megaphone economics he is applying at the grand occasion might backfire. Not that we do not share his vision of a prosperous Zimbabwe, but that he should be realistic and project to the world our dire situation that forced President Emmerson Mnangagwa to abandon the Davos trip and instead sent Mthuli to represent the nation’s aspirations.
At the moment, fuel prices have gone up 150%, prices of basic commodities continue to spiral, while inflation is also on an upward trend – all under Ncube’s watch. It is a cause for concern. For now, his projections to bring down inflation to 10% sounds like a pipe dream, especially at a time the price of bread has risen from $1,50 to $2,20 this week.
Worse, Zimbabwe owes $7,4 billion in external debt and needs to pay $1,2 billion of that in 2019, most of it to the World Bank and the African Development Bank. And Ncube says he is speaking to G-7 countries to find a way to make those payments.
One of our country’s biggest problems is the dysfunctional currency market. For the past few years Zimbabwe has used an electronic dollar that is officially pegged one-to-one with the US dollar. The black market rate is around three to one.
The country’s sovereign debt was expected to grow by 8,69% to a record high of $20 billion by the end of 2018, according to local fact-checking firm, ZIMFACT. This situation has been stoked by continuous borrowing to finance budget deficits through treasury bills and central bank overdrafts.
The recent three-day stay away shows that there is cancer in the economy and we are delighted that President Mnangagwa has realised this, and is initiating a national dialogue which will involve opposition parties, civic society and churches, to deal with it.
We believe this is the best way to go, especially considering the “United We Stand” mantra. No nation will prosper if there is no unity of purpose. In light of these developments, we hope that Ncube will carefully assess what is on the ground before he pronounces on targets that cannot be achieved in the short or long term.
Zimbabweans need correct answers. That is why megaphone economics won’t be a solution, but may fuel more unrest as the man in the street juxtaposes the government’s achievements with its projections. Doctors can only beat their chests when the patient has had a successful surgery