Kudzanai Gerede Business Correspondent
THE appointment of a new-look cabinet last Friday by President Emmerson Mnangagwa has inspired great optimism for the nation.
The appointment of a young and daring technocrat in the field of macro-economics Professor Mthuli Ncube to take over the Ministry of Finance and Economic Development has been singled out for honours across most quarters.
He takes over from Cde Patrick Chinamasa, who has been at the helm of the ministry for the past five years during where his efforts to manoeuvre past economic albatrosses were evident, albeit with somewhat substantial success as he made strides to re-engage with external financial institutions that had ceased extending credit lines to the country for over 15 years.
He successfully oversaw the IMF staff monitoring programme to manage the public sector wage bill and initiated the arrears clearance programme which will be of great importance to the economy going forward.
However, with the cash crisis still the elephant in the room, despite the introduction of the bond note currency to mitigate the cash shortage, the currency question unanswered and other key macro-economic fundamentals still invariably imbalanced, the economy needed new mind to stir the ship.
Prof Ncube comes in with immense expertise from a previous life as the chief economist and vice president of the Africa Development Bank, but here, the stakes are high to deliver.
Speaking to media after his appointment Minister Ncube reiterated the need for market discipline to restore confidence in the economy to attract much needed investment flows.
“As we work towards becoming a middle income country, which is doable, we need to create pillars for that which involves restoring confidence in the economy, working externally on the arrears clearance front, make sure investors can be interested in Zimbabwe again. I will be rolling out a plan on the arrears clearance,” he said.
“Building credit lines globally, its already started, institutions such as CDC showing interest with a $100 million facility that we need to conclude and make sure we bring in those reserves and credit lines,” said Minister Ncube.
He also hinted on the need for fiscal consolidation which will entail restricting Government expenditure to sustainable levels on one end while also expanding its revenue base on the other.
As it stands Government has been accruing budgetary overruns of around $400 million annually for the past few years, all borrowed from the local market, a situation that has seen credit rate towards Government rising while that towards private sector, which is the mainstay of the economy, capitulating.
Prof Ncube has already professed his reservations about the bond note currency which has been the major talking point for some time.
His daring opinion to re-introduce a local currency has been seconded by most economic experts saying the move will restore the country’s monetary policy autonomy.
Economic expert Mr Pepukai Chivore said it was high time the country has a local currency if it is to deal with the scourge of exchange rate risks which are fuelling inflation.
“With a multi-currency system in place, there was some currency stability but this came at a cost, there is no free lunch in the world. Zimbabwe lost its monetary policy autonomy and it gave up control of its interest rates and monetary supply. As such we saw that monetary supply has been growing what we call RTGS dollars and this has brought with it inflation and exchange rate risks. There is need to go back to basics and at least have our own currency.
“So for us to grow as an economy we need to have a fiscal policy which complements the monetary policy, but then we do not have that monetary policy autonomy, and we need to have that monetary policy autonomy back,” said Mr Chivore.
Another economist Mr Percy Gwanyanya said the prevalence of the parallel market should be dealt with in order to overcome inflationary pressures.
“Because Zimbabwe is an import dependent economy with imports costing 60 percent of the GDP, it means the increase of cash premiums is going to be passed into the cost of imported intermediaries or final goods, which is inflationary. If you look at cash premiums July 2017, they were around 20 percent, but have now increased to 80 percent, which is a four times increase,” said Mr Gwanyanya.