The Sunday Mail
Howdy folks!
The unfolding global situation is apparently a disadvantage to our economy since it is in a relentless quest to rejuvenate from slackening growth.
While we are trying to deal with internal economic challenges, there are other external developments that are also threatening our macro-economic environment, given our limited policy options to inhibit ourselves from the vulnerability we are exposed to.
America, for instance, is hiking its interest rates as it moves away from its quantitative easing stance. And the transmission of adverse consequences arising from such a move is inevitable for Zimbabwe, being a user of the Western country’s currency.
As we trade with other nations, with our financial system also integrated into the global financial spider web, we may not come out with our ties and suits on.
The US dollar is going to gain strength as a result of the envisaged rise in interest rates, as the US is pursuing contractionary monetary policies.
That will result in exchange rate fluctuations which have a number of consequences to our economy.
It should be noted that exchange rates play an important role in adjusting to shocks and inhibiting adverse impacts on macro-economic stability.
On top of that, China’s economic slowdown will ameliorate her appetite for commodities and that will choke the prices of the commodities that we are exporting — talk of gold and platinum.
Already, Anglo Platinum — the world’s giant platinum producer which also owns Unki Mine – has halted investment in all growth and replacement projects until 2017, thanks to these relapsing world prices.
Impala Platinum, which owns Zimplats, has also taken the same stance.
This is when they are ideally supposed to be recapitalising and increasing their production levels to attain reasonable return.
It is continuously becoming difficult to export by the year, while importing is getting cheaper and cheaper.
Banked export receipts dwindled from US$4,5 billion in 2013 to US$2,8 billion last year and the downward trend is likely to continue this year as mineral exports are projected to tumble.
In light of the above, we are faced with a situation that requires us to implement robust policy options.
We need a holistic approach that looks at all our liquidity flow; and reduce all leakages to the minimum while maximising all injections into our economy.
The idea is to try as much as possible to keep optimum levels of liquidity in our formal systems so that we can oil our productive sectors.
For instance, we need to interrogate how we can promote international remittances, especially Diaspora remittances, as these have been growing dynamically since 2009.
But we need to do more to promote exports as these are our top source of liquidity as long as we are still stuck with dollarisation.
There are no freebies in a dollarised economy, and apart from just working hard, we need to be dynamic, innovative and creative in our approaches.
If we had our own currency, we would be talking about devaluing our local currency right now to give impetus and incentives to exporters.
But as we have already seen, internal devaluation cannot be the silver bullet as there is not much space to lower costs of production, especially since things like electricity tariffs are likely to go up in a matter of weeks.
What we also need now is a holistic approach towards eradicating our liquidity situation, which brings on board all stakeholders.
Consumers should only import what they cannot get locally, be it goods or services.
Otherwise we will continue to lose the liquidity that should be circulating in the arteries of our economy.
Then we have a situation where our exports need to be widened worldwide.
Currently, 67 percent of our exports are going to South Africa.
What amazes me the most is that our exports have demand all over the world, including in countries where currencies are gaining.
We need to urgently diversify our export markets and spread our risk from one country. We cannot keep our eggs stashed in one basket.
Our Government must provide incentives to local producers who are willing to export their products to new markets.
Again, it is important to negotiate more bilateral trade agreements targeted at reducing market access conditions with attractive markets.
But we also need our Central Bank and Government to gang up in mobilising concessionary lines of credit to extend to local firms that are willing to create new products or revive the production of goods that we have ceased to produce with a growing demand on the global market.
At the moment, we need to put in virtually twice as much effort to get the same amount of money we got from exporting mineral commodities not so long ago.
We, therefore, now need a sustainable approach that balances the use of our local resources with the need to stimulate our economy.
Later folks!
