President Emmerson has advised the nation to be prepared for more fiscal and monetary reforms. Speaking at the Zimbabwe National Chamber of Commerce annual congress that happened in Victoria Falls last week.
He insisted that his government would not shy away instituting deeper reforms to bring sanity to the monetary and fiscal space. Those reforms that they deemed good for the country, his government will continue to push without prejudice. This comes after the major talking point of the week has been the shock reintroduction of the Zimbabwean dollar coupled with the dropping of all other forms of legal tender leaving the renamed RTGS dollar as the sole legal tender.
The reactions to this policy may not have exactly been what government desired though. They finally managed to pull some steam out of the parallel market exchange rate problem but the response of prices will be somewhat worrying with early indications showing sizable price increases. The interbank market exchange rate meanwhile seems to have also yielded with various banks offering higher rates by as much as 25%.
It’s been a week which has left most Zimbabweans heads spinning and the President has informed those who pay attention to brace for more. It is well known at this point that the academic position on the return to the Zimbabwean dollar is that while we need our own currency we are far from ready for it fundamentally. It is this disregard for the necessary fundamentals coupled with the ambush nature of the policy that has citizens riled.
The depth of our recent reforms is also questionable. The true definition of deep reforms would be changes to the root causes of the problems rather than eliminating symptoms. We still have low & uncompetitive production, huge money supply which we are set to add more notes to, an unstable currency that is a poor store of value and a system that doesn’t serve all participants in the market. To call these reforms deep is not quite accurate.
Forewarned is, however, forearmed and considering what we have just witnessed we should indeed prepare for more of the same. On Friday we saw SI 149 which now lists maize as a controlled commodity. This reasserts the GMB as the sole buyer of maize. So they are clearly not done with the surprises or ambushes.