Currently, the country is locked in a perpetual cycle of a weakening economy. The rate of annual inflation took a leap from roughly 76% in April to 98% in the month of May. This means that by now inflation has surpassed the 100% mark. Actually, some projections have posited that by the close of the year inflation will be almost 300%. These stats are in synch with the physical reality on the ground; you need only get into the supermarkets to see for yourself. The RTGS$ has gravely weakened to point where 1USD is now averaging RTGS$10. Yet with all these apparent indicators of dire living standards, someone is busy celebrating stats far-removed from actual experiences on the ground.
Finance Minister’s Tweet
On the 22nd of this June, Professor Mthuli Ncube tweeted something I shall quote verbatim. “Prices of basic goods in the consumption basket in Zimbabwe have dropped by an average of 19% in US$ terms, from January 2018 to June 2019. See table below from Treasury. The prices in RTGS$ terms are therefore grossly inflated.” He attached a table which included commodities like Nugget 50ml shoe polish which has dropped from USD1.74 to USD0.50 or Willard’s peanut butter which has dropped from USD1.76 to USD0.75. Alright, so it’s a given that in terms of USD pricing, most goods and services are now much cheaper. How that can be something worthy of praise and a basis for saying RTGS$ pricing is overinflated is something that eludes me. The fact that this is coming from an educated technocrat is quite astounding.
First off, his tweet is grossly unbalanced and I must say, insensitive. The tweet seems to insinuate that we operate in a dollarized environment which isn’t the case. The majority of people in Zimbabwe actually earn their incomes in RTGS$. So what’s the point of celebrating a fall in USD prices when the majority don’t earn in USD. Alex Magaisa, a lawyer and academic queried the minister on why he didn’t apply the same logic with regards to workers’ salaries. Essentially if that were to be done you would notice that salaries of workers have actually plummeted in USD terms. On average teachers, for instance, now earn roughly around USD30 per month. This then presents another metric into the equation. Supposing we adopt the USD prices can a teacher then afford all his needs on that USD30, absolutely not! So we would have loved to see more columns on his table or rather a separate one citing the trend for RTGS$ prices. However, I’m sure the minister would have never done that as it would have defeated the whole initial purpose of his tweet.
His Tweet Shows Flawed Fundamentals
Most of you will remember that when the finance minister was announced there was a glimmer of hope in people’s minds. The general populace saw a light at the end of the tunnel; little did they know they were headlights of an oncoming train. Mind you I don’t have anything against the minister as an individual; I’m more concerned about the discharge of duties. I’ve noticed over time that he’s more given to presenting stats that give the impression that he’s achieving something good. His recent tweet speaks to that effect because he chose to only present stats that seem to suggest he’s bringing about good. Yet the stats are far-removed from what’s obtaining on the ground. Just this morning I heard of a sad incident that occurred to a school head in Marondera who fell from an avocado tree and died on the spot. Well, he wanted to pluck off avocados so that he could sell them. All because standards of living have seriously declined and people now have to explore all means possible to make a living. Which is why I feel it’s insensitive and distasteful for someone at the helm of the finance ministry to celebrate a fall in USD prices and actually state that RTGS$ prices are grossly inflated.
The Budget Surplus Issue
Just recently the finance minister was also celebrating a budget surplus. Even Nick Mangwana was recently applauding Mthuli Ncube for achieving the feat of a budget surplus in less than 8 months. So there’s a budget surplus? The big question is where exactly it is because earnestly we aren’t seeing it. I think it’s problematic when stats are based on cash accounting which seems to not include expenditure that’s not yet paid (but having been incurred already). At best the figures arrived at in giving the narrative of a budget surplus are cooked up and not a true reflection of what’s actually happening. There’s an interesting question actually about this budget surplus issue. How can we really be having a budget surplus when the interbank rate has been falling, increasing inflation, increasing government expenditure, forex shortages and a host of other factors?
The closer you look at it you realize stats being churned out are meant to window dress and give an impression to the international community that ‘Zimbabwe is open for business’. Economics shouldn’t be about trying to prove a point or experimenting with financial theory. Rather efforts should be directed towards improving the lives of ordinary citizens.