Former Finance ministers speak on economic rot


HARARE – Two of Zimbabwe’s former Finance ministers who served at critical junctures in the history of the country’s economy are seeing the nation’s economic prospects worsening if President Robert Mugabe gets re-elected in 2018.


The two former ministers are Simba Makoni, who served as Finance minister between 2000 and 2002, and Tendai Biti, who controlled the financial levers between 2009 and 2013.


Makoni presided over the Finance ministry during the damaging land reform programme.


It was during his time that the country’s economy took a turn for the worst owing to the land seizures by the country’s former liberation war fighters that saw agricultural production plummeting to its lowest ebb.


As part of the land reforms, swathes of productive farmlands were seized from white commercial farmers for redistribution to landless blacks who were not just ill-equipped, but lacked the requisite skills.


To mitigate the economic shocks caused by the haphazard land reforms, Makoni came up with a raft of austerity measures that went against Zanu PF’s socialist thinking. In the end, he had to be pushed out.


Biti, the former MDC secretary-general, took over the ministry at another critical point in Zimbabwe’s history.


This was the period when the 2008 polls failed to produce a clear winner, resulting in the formation of an uneasy government of national unity (GNU) in which Mugabe shared power with MDC leader, Morgan Tsvangirai.


Biti is credited for instituting reforms that stabilised Zimbabwe’s economy which included cash budgeting.


With the country’s economy in turmoil, Biti and Makoni told the Daily News on Sunday in separate interviews that their fellow countrymen should brace for the worst in the event that Mugabe wins next year’s elections.


A common thread in their arguments is that there is no way Zanu PF could abandon its angry-mob policies and adopt pro-capital measures because the ruling party feels threatened by business.


Makoni decried Mugabe’s alleged failure to grasp the country’s economic reality.


He said Mugabe and his government were not dealing with the reality of the economic situation.


The Mavambo/Kusile/Dawn party leader said it was important to first understand that the economy is operating using the US dollar as its anchor currency, which American unit is increasingly becoming elusive.


“.. and our misfortune as a nation is that we must brace for worse things to come, more hardships and this is the hard truth that we must learn to live with,” Makoni said.


Makoni, who once served as an economic adviser in regional bloc, Sadc, said Mugabe’s decision to introduce bond notes — a surrogate currency meant to alleviate the cash crisis — set in motion a trail of events that led to the total collapse of the country’s financial services sector.


“Bond notes are not the solution and we have always said this. The price increases are just symptoms reflecting the situation on the ground and Mugabe can order the Zambezi River to flow back to Angola but it just won’t because of the forces of nature,” said the former Finance minister.


“Such forces of nature also apply to the value of currencies and that is why you see that the bond notes have not mitigated the cash crisis and collapsing economy, it has worsened it instead,” he added.


Last week, jittery Zimbabweans besieged shops and fuel stations as fears of worse things escalated, setting off a vicious economic crisis.


As a result of the dire economic situation, panicking shoppers swamped supermarkets to buy as many goods as they could lay their hands on.


This was in the wake of growing shortages of basic consumer goods triggered by the acute shortage of foreign currency.


Mugabe responded by hinting at the introduction of a new price control structure.


Addressing Zanu PF supporters soon after landing at Harare International Airport from the United Nations General Assembly on Monday last week, he said his government would deal with “price increase madness” in just two days.


Biti who became Finance minister in the inclusive government between 2009 and 2013 soon after the record-breaking hyperinflationary era said government was “clueless” and didn’t know how to solve the current crisis.


“We are in a mess because of Zanu PF’s toxic policies and it can only get worse to a point where we could all perish. We are having this crisis because of the printing of bond notes and the financing of maize production in the last season,” said Biti.


“GMB (Grain Marketing Board) buys maize at $390 per tonne and sells it for $250 per tonne. Some people are buying a tonne from GMB and selling it back to gain $140,” Biti said.


As politicians whose parties are trying to wrest power from Mugabe and his Zanu PF party, it is easy to dismiss their arguments but economists have also warned of worse shortages of basic commodities and an expanding parallel currency market after Mugabe indicated his intention to re-introduce price controls across all sectors.


Economic analysts canvassed by the Daily News on Sunday said it will take radical reforms to put brakes on the current slide towards total economic implosion.


University of Zimbabwe (UZ) economics professor, Tony Hawkins, said any prospects for economic recovery would require serious reforms.


“Look at the rate of inflation, look at what is happening on the stock exchange. There has to be very radical reforms, probably a change of people in positions of authority,” Hawkins said.


“Pathetic allocations (of foreign currency) by the Reserve Bank of Zimbabwe (RBZ) are forcing companies to go to the parallel market for foreign currency where they are asked high premiums, and this in turn is causing prices to rise,” he said.


This view was also supported by another UZ economics professor Ashok Chakravarti who is also government’s economic advisor.


“Naturally, when importers are not getting allocations they turn to the parallel market in order to restock to avoid shortage of goods, and the result is the increase of prices,” Chakravarti told the Daily News on Sunday’s sister paper the Daily News last week


Zimbabwe is relying on foreign imports for its much-needed basic supplies including drugs, Medicare equipment and other hospital consumables.


The country imports more than $400 million worth of basic drugs each year.

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