ZIMBABWE’S economic problems are structural and long-term in nature and cannot be solved by short-term populist policies, a Bankers Association of Zimbabwe (BAZ) executive has said.
Speaking at a Confederation of Zimbabwe Industries economic symposium in Harare last week, BAZ advocacy executive Clive Mphambela said policies that win elections were irreconcilable with economic realities on the ground, which need long-term solutions.
President Emmerson Mnangagwa last month announced that the country would hold harmonised elections in five months. With elections due by July, the governing party is already on a spending spree. The ZANU-PF government recently bought 52 top of the range vehicles, and is planning to buy more, for the nearly 300 traditional chiefs in the country.
Zimbabwe, which adopted the use of multiple currencies in 2009 after hyperinflation decimated the local dollar, is facing an acute shortage of foreign currency.
The forex shortages have seriously affected banks’ capacity to meet international obligations for both the private and public sector.
This has affected companies’ ability to buy raw materials and machinery to improve capacity utilisation and increase production.
“Given that Zimbabwe’s problems are structural and long-term in nature, they are not amenable to short-term, election oriented populist policies. The policies that win elections are simply incompatible with the social and economic realities on the ground,” Mphambe further said, adding that in the short to medium-term, economic performance would be severely restricted by a number of severe constraints.
“(It’s) reasonable to state that the most pervasive constraint will be the availability of foreign exchange, followed closely by energy — that is electricity and fuel supply — water and transport. Foreign currency shortages directly impact energy security,” said Mphambela, noting that the uncomfortable “reality in a dollarised environment was that there were too many unknowns”.
“Despite the unknowns, two aspects stand out. There are signs that the US economy continues on a strong productivity driven growth phase. This has been making imports cheaper and exports more expensive, thereby undermining competitiveness for our economy that entered in 2009 at very high cost base and price levels that reflected many years of chronic inflation ending in hyperinflation,” Mphambela noted.
Zimbabwe is re-entering positive inflation territory with hard currency liabilities, he said.
“We are really in dangerous territory as an economy…Arguably, it should take a while to ease foreign currency bottlenecks, especially if we continue to politick and shy away from the necessity of restoring full dollarisation,” he said.
He said the banking sector had continued to face a number of challenges such as increased demand for bank notes, depleted nostro balances, low exports and declining correspondent banking relationships. – FinGaz