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Wednesday, 18 December 2019 13:21

Ncube, Mangudya should park egos in 2020

As the curtain comes down on the year, one cannot stop pondering on what the future—yes the immediate future has in store for long suffering Zimbabweans. As Econometer Global Capital, we consistently sifted through Zimbabwe’s political economy, attempting to unpack why a country that has so much potential appears to be sliding back.

In our analyses, issues relating to ruinous government policy and confusion relating from inconsistencies were played out. Another issue that we would validate that appears to have put Zimbabwe on the tenterhooks is the cold war between monetary and fiscal authorities. Put differently, we are of the view that cohesion between pronouncements (which can be interpreted as policy) between Finance minister Mthuli Ncube and Reserve Bank of Zimbabwe governor John Mangudya has been minimal.

Ideally the central bank chief, while he reports to the Finance should operate the apex government independent of his boss. Ncube’s predecessor Patrick Chinamasa, a lawyer by training gave Mangudya greater latitude to run the central bank independently. There were consequences, some of which Ncube says he wants to undo.

The increasingly visible policy differences between Ncube and Mangudya have had some results. The outcome has seen policies being quickly reversed, confusing contradictions in public statements and politicians and experts siding with either of the two.

The unilateral measures by the Treasury which include abolition in June of the decade-old multi-currency system that allowed the use of the greenback and the South African rand within the country, was widely seen as a reflection of lack of unison between the central bank and the Finance ministry.

Since the introduction of the bond notes in 2016 which according to the RBZ, were at par with the dollar, Mangudya maintained this fallacy in his bid to avoid unsettling the markets. While removing this parity made a lot of economic sense it resulted in carnage that authorities are battling with. Many argued that Zimbabwe was not ready to introduce the monetary reforms citing the absence of key fundamentals that can support a domestic currency.

In his 2020 National Budget, Ncube announced that government would scrap subsidies on maize and wheat imports. This move which dovetails with IMF-prescribed structural adjustment programmes was expected to push the price of the staple and cause political instability.

 Barely a month after the Budget and a few days before the Zanu PF annual conference, President Emmerson Mnangagwa announced that government would subsidize the two agricultural commodities, a development that was seen as a reprieve to consumers. The policy inconsistencies cannot get any worse than this.

For now, Zimbabwe’s economy continues to be hamstrung by rising inflation, foreign currency shortages, high unemployment and rolling power cuts. Going into the future, we urge monetary and fiscal authorities to harmonise their policy pronouncements and put Zimbabwe first instead of their egos.

Published in econometer