The Reserve Bank of Zimbabwe (RBZ)’s announcement over the weekend that it was going to draw a US$ 500 million facility to inject liquidity into the inter-bank foreign exchange market, leaving the parallel market paralysed.
The move resulted in less trading on the black market as money buyers and would-be sellers took a cautious approach.
The US$ 500 million facility came in as a cushion to the importation of critical commodities, i.e. fuel, electricity, grain as well as bailing out the productive sector, this is according to Minister of Finance and Economic Development, Mthuli Ncube.
Apparently, the RBZ has since issued a statement indicating that the prevailing interbank rate would be used so as to give a reflection of the market conditions. But market watchers are not fancied, they say the same was once tried before, but to no avail.
But economic analyst Godfrey Kanyenze told a local radio station this morning that the attempt by government to liberalise the interbank rates, in regard to the procurement of fuel, without addressing the economic fundamentals would backfire. He said this is so because fuel has a great impact on other commodities, and also because of the fact that the inflationary tendency is going one way.
Market analysts have always been saying Zimbabwe need to do away with window dressing economics. They maintain that command economics have never worked anywhere in the world.
As if that was not enough, the government has again issued a statement saying it was reducing ZUPCO fares so as to help the suffering travellers, despite the fact that the same was tried few months ago, and again to no avail. The government had been trying to subsidise the economy, but failed owing to lack of sufficient foreign currency reserves.
Economists are on record saying borrowing for consumption is counterproductive, but the Zimbabwean government seem not to learn.
According Steve Hanke, Professor, Applied Economics, The Johns Hopkins University, Zimbabwe’s government needs to take serious steps to achieve macroeconomic stabilization, as opposed to piece meal and cosmetic economics.
He says the once prosperous nation is now ranked among the poorest and most repressive countries in the world owing to bad economics, the likes of Venezuela, with inflation shooting up.
Zimbabwe’s former Minister of Finance and Economic Development Tendai Biti, agrees with Hanke that the current economic dynamics being employed by the government won’t work.
Speaking on a radio program on Monday evening (yesterday), Biti said Zimbabwe’s economy is failing because of the predatory behaviour by the government, as opposed to the ideal fundamental economic reforms.