It’s a thankless job for Mthuli

21 Nov, 2021 - 00:11 0 Views
It’s a thankless job for Mthuli

The Sunday Mail


Time is indeed as stealthy as a thief.

It is hard to imagine that the year is nearly out. How time flies!

Sometimes it zooms by like an alien spaceship.

If you snooze, it simply passes you by.
It is even hard to imagine that during this time three years ago, the country was in the grip of a manic frenzy of panic buying and hoarding, as people fretted that the madness of 2008 was slowly returning.

Much of the anxiety was driven by the Reserve Bank of Zimbabwe (RBZ)’s October 1 decision to order banks to separate nostro foreign currency accounts from local RTGS or bond note accounts by October 15, 2018.

This signalled the beginning of currency reforms after a new Government had been sworn in a month earlier.

However, it unfortunately fed market rumours that authorities were planning to reintroduce an “unwanted” Zimbabwe dollar, which was dreaded for its past infamous reputation of losing value with reckless abandon.

It was obviously a traumatic prospect for those who had lived through the heady days of the hyperinflationary era, where many folks unhappily learnt that monetary values could ridiculously extend to quintillions and sextillions. Even the then governor, GG (Gideon Gono), had grown weary of hacking off zeros on the local currency that he eventually gave up. Kikikiki.


But, for some, the 2018 chaos was mainly dramatised by shortages of Coca-Cola.

Yes, Coca-Cola!

The perennially moaning, whinging and whining brigade was naturally apoplectic.

“Of all the Zim tweeps outchea (sic), not a single soul has even tweeted about how life sucks right now cos there is no Coca-Cola? Did Pepsi and Miranda really come and mess you up? I feel lost without Coke,” tweeted a bitter sweet-toothed chap on October 15, 2018.

Christmas was particularly unbearable for addicts of the sugary waters.

“25 December, a day popularly known as Christmas Day. In other countries, they celebrated this day with food, drinks, good music and of course family. In Zimbabwe . . . no Coca-Cola . . . Cry my beloved Zimbabwe,” tweeted another dejected Zimbabwean. Kikiki.

Argh, how things change!

Fast forward to 2021, Bishop Lazi would imagine that the complaining duo are now living in paradise.

Not only is their favourite beverage ubiquitous, but it is now embarrassingly cheap.

For US$1, one can walk away with four 300ml bottles.

Salaries clerk

Quite a lot has happened since 2018 that it is easy to take it for granted.

Basic commodities are now readily available. For the first time in decades, Zimbabwe has managed to produce enough maize and wheat to feed herself.

Most key highways and roads in both rural and urban areas are now being fixed.

Hospitals, schools and clinics are being built using the magic wand of devolution.

Rural district councils are busy buying equipment to rehabilitate their roads and to capacitate themselves to deliver services that communities deserve. Irrigation infrastructure is being repaired, while new land is being opened up for agriculture. Key infrastructure such as airports and border posts is being modernised to meet world-class standards.

As the Bishop writes this, zinwa, which has been spearheading the construction of dams that will largely change the face of cities such as Bulawayo, Harare and Chivhu over the next three years, is awaiting delivery of 40 borehole drilling rigs that it will use to drill more than 35 000 boreholes countrywide.

We could spend the whole day discussing the major projects around the country.

It has been a remarkable turnaround from the pre-2017 era, where hope had given way to disillusionment due to inertia in key national projects and reforms.

Back then, the Government had essentially morphed into a salaries clerk whose major role was paying salaries to civil servants.

The public sector wage bill actually accounted for 90 percent of revenues.

It has taken incredibly hard work from the team at Treasury to re-orient the country’s budget in order to ensure that most of the funds go towards development while at the same time eliminating unsustainably humongous budget deficits.

Last year alone, Prof Mthuli Ncube set aside 33 percent, or $140 billion, of the $422 billion 2021 Budget for infrastructure development, which is huge.

For perspective, in the 2010 Budget, when Tendai Biti was in the same role during the Inclusive Government, he only allocated a pitiable US$38 million for transport, including roads and rail.

Kane ndimiwo!! Kikikiki.

But re-orienting and adjusting the Budget was excruciatingly painful.

Austerity was indeed painful, but necessary.

Without putting our finances in order, it would have been next to impossible to have the wherewithal to fight off two successive drought seasons, a devastating cyclone and a global health crisis, and still be able to bankroll our development agenda.

The IMF report last week showed that we are on the right path. But, while we have achieved a lot, more remains outstanding.

We are probably lagging behind our peers by more than two decades. What makes our work doubly taxing is the fact that we are not only completing stalled projects of a past era, but we are having to start new projects and restore the proper functioning of Government systems and processes to get Zimbabwe working again.

Zimdollar headache

This makes Mthuli Ncube’s Budget this week very interesting.

Not that there will be any surprises, as the framework will largely be shaped by key deliverables set and outlined in the National Development Strategy 1 (NDS1), but many will be curious to know what he will do to stabilise the Zimbabwe dollar. It is an issue that understandably dominated discussions during the pre-Budget consultations and has continued to exercise the mind of ordinary wananchi.

Even economists Eddie Cross and John Robertson have contributed their two cents of what needs to be done.

You see, wild swings in the value of the Zimbabwe dollar directly impact on the material well-being of ordinary people.

A currency is an asset valued as a transacting tool and a store of value, which means its value has to be anchored to give confidence and comfort to the bearer.

It, however, has to be remembered that since October 1, 2018 when banks were given a directive to separate nostro foreign currency accounts from local RTGS and bond note accounts, the currency reforms have been ongoing. Three key developments occurred in 2019 in this pre-conceived journey to resurrect a currency that had been dead for more than a decade.

On February 20, the central bank effectively announced a new currency made up of electronic local currency and bond notes, which were linked to the US dollar through a managed floating exchange rate.

Later, on June 24, the Zimbabwe dollar was made the sole legal tender in Zimbabwe through Statutory Instrument 142 of 2019. This culminated in the introduction of new $2 and $5 bank notes on November 11.

All things being equal, this would have marked the completion of the currency reforms.

But faced with the unprecedented external shocks such as the pandemic, the RBZ later allowed the US dollar to be used for local
transactions, which position continues to this day.

Unsurprisingly, this has come with its own baggage, especially where most people prefer the US dollar for obviously reasons.

However, while the MDC continues to advocate for full dollarisation as the solution, those who have studied economic developments in Latin American countries such as Argentina, Panama, Ecuador and El Salvador, which went the same route, know that continued use of the US dollar is unsustainable in the long run.

Well, in Argentina, they tried the Convertibility Plan in 1991, which pegged the exchange rate of the pesos to one-to-one to the US dollar as a nominal anchor for inflation.

While it brought relief in the short term, it affected the country’s competitiveness in the long term, plunging the country into an unsustainable debt trap as authorities were unable to defend the currency peg.

The plan was duly scrapped in January 2002. Ecuador is relevant in our case. In order to pre-empt rising inflation, it dollarised in January 2000.

Again, like Argentina, it lost its competitiveness and its monetary regime is barely being sustained by Diaspora remittances, its major source of income.

Its economic fundamentals continue to deteriorate and scholars believe it’s a matter of time before the system collapses.

We witnessed this here when net US dollar outflows and a deteriorating current account position later led to cash shortages and its associated inconveniences.

So, is it the right time for Treasury to ditch the US dollar? Proverbs 19:2 says: “Desire without knowledge is not good, and whoever makes haste with his feet misses his way.”

Proverbs 21:5 adds: “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.”

Luke 14:28 further counsels: “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it.”

It is about being diligent and choosing the right moment. Remember, Zimbabwe remains encumbered by sanctions, the external shocks posed by the raging coronavirus are still around and country has had to build its own reserves to support its currency.

All these are key dynamics at play, and no one knows this better than Mthuli.

It is really a weighty, onerous but largely thankless job for him.

Reform is a process; not an event.

All in good time!

Bishop out!

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