‘There are no signs of a crumbling economy’

Eddie Cross
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ZIMBABWE is not showing signs of a dying economy although the country is faced with economic challenges that have brought untold suffering to the ordinary citizens, economic commentators have said.

This is on the back of the sanctions imposed on the country by some Western countries after the Government in 2000 embarked on the successful Land Reform Programme meant to address the imbalances created during the colonial era.

On the back of the economic challenges that the country has reeled under over the years, the Second Republic that came into being in November 2017 led by President Mnangagwa, has been on an international crusade to thaw relations with the global community from which the country has been excluded.

As a result of isolation from the global village, Zimbabwe has found it grim to navigate the adversarial effects of the illegal sanctions particularly in unlocking fresh credit lines from multilateral institutions like the International Monetary Fund (IMF) and the World Bank as well as attracting fresh credit lines.

So far, Zimbabwe is in dire need of fresh lines of credit to stimulate growth in various economic sectors as well as Foreign Direct Investment (FDI) to rebuild the economy.

The Second Republic, through the engagement and re-engagement drive, is seeking to improve relations with the rest of the world with the ultimate goal of attracting trade and investment from across the globe.

Thus, it is in this context that Zimbabwe has been able to make in-roads in as far as thawing relations with the global village, particularly the West.

And this has been exemplified by the Government’s success in being able to bring different stakeholders including the European Union to the table during meetings held last year on Zimbabwe’s structured dialogue platform on debt clearance with creditors and development partners.

In an interview, economic commentator Eddie Cross said while the economy could be seen as collapsing, the Second Republic is making frantic efforts to douse the flames of economic dissipation, adding that at present the country does not reflect any signs of a dying economy.

“The local dollar is dying but our economy is not dying; the economy is growing and stable and in fact there are no real fundamental problems in the economy. The only issue is; do we want a local currency at the moment? What we are doing is destroying the local currency.

“And this has huge implications for the rest of the economy, it creates major sectoral problems but it cannot lead to real collapse.

“We are more resilient than that, but it’s creating huge problems for the country and I would say that the main issue that confronts us today is how to restore our local currency to a position where it can act as a means of exchange and retention of value,” he said.

On the parallel market, the Zimbabwe dollar has this week plunged to between $16 000 and $16 500 per United States dollar from about $8 500 per US$1 at the end of December last year. This week the official rate is at US$1: $10 315.

Analysts are on record claiming that because prices have increased to a point where many ordinary people cannot afford them, the existing volatility of the Zimbabwe dollar is having an effect on the economy as a whole.

Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has attributed the depreciation of the local currency against major currencies to speculative activity and a shortage of hard currency in the market.

On account of the above circumstances, Mthuli has indicated that the Government will soon unveil fresh and harsh measures intended to curtail the local currency from relentless sliding.

Responding to written questions, economist Victor Bhoroma said on account of the existing circumstances, the Zimbabwe dollar economy is now quite small even though the exchange rate disparities create chaos on the market and impact consumer spending.

“Thus the economy is not collapsing largely because it is anchored on a stable United States dollar as a functional and trade currency.

“Similarly, the growing mining export earnings and diaspora remittances have been key to the resilience witnessed since 2019,” he said.

Bhoroma said the top most signs of a dying economy include hyperinflation, low levels of production across all economic sectors, rapidly declining consumer demand and shortage of key commodities such as petroleum, forex and basic nutrition for human consumption.

Another economic commentator Farai Mutambanengwe said there are a number of indicators such as a negative Gross Domestic Product (GDP) growth, consumer aggregate demand, and high unemployment levels that reflect an economy is crumpling.

“In our situation, if you are talking about an economy that is highly informalised like Zimbabwe, then it becomes very difficult because we don’t have much in the way of macro-economic numbers so a lot of it becomes estimates. People will just guess what the numbers are rather than definitely state what the numbers are.

“Other indicators that can also show you that the economy is slowing down is tax revenue, but again there is also a factor of informalisation . . . so it’s difficult when you are dealing with an economy like ours because employment now means a totally different angle compared to other countries.

“And it’s a valid point because some people in the informal sector actually earn relatively high levels of income so you cannot say they are unemployed. They are employed but not formally employed,” he said. – Business Weekly