In an exclusive interview with Bloomberg News last week, Finance Minister Professor Mthuli Ncube Professor Ncube noted that after reining in state spending and boosting tax revenue through big micro economic policies, the government understands the impact of its bold decisions, but emphasised that the pain shall be short term.
“What people are feeling is really wage compression and not hyperinflation. Prices adjusted instantly to the exchange rate, but wages have been too slow to catch up with the adjustment. The issue is about wage adjustment and I am a big champion of wage adjustment,” he said.
“The big macro-economic decisions should be complete by year-end. In December, everything stops in terms of the big decisions. Beyond that, we focus more on jobs, growth, productivity and development,” he added.
According to the Minister, the government is ready to settle with global lenders, sell assets and make the difficult spending decisions needed for financial recovery.
Professor Ncube’s planned reforms include establishing a nine-member Monetary Policy Committee that will reduce interest rates from 50%.
Within 12 to 18 months, the nation plans to sell domestic bonds with a duration of as long as 30 years to fund infrastructure, and also approach international markets.
The reforms are aimed at restructuring the country’s US$9 billion of external loans.
Under a debt-settlement plan, which Ncube said he is discussing with creditors, Zimbabwe would complete an International Monetary Fund Staff-Monitored Programme in January.
It would then borrow the US$1 billion it owes the World Bank and the African Development Bank from the Group of Seven industrialised nations, immediately win US$1 billion in relief from the two lenders, which would be paid back to the G7 creditors, and expect so-called Paris Club creditors, to whom it owes $3.8 billion in bilateral debt, to take a ‘haircut.’