EDITORIAL: Mthuli Ncube takes Zimbabwe from bad to worse
Finance minister has little to show for his efforts as country grapples with daily power cuts and shortages of basic goods amid its worst economic crisis in a decade
When Mthuli Ncube accepted the job as finance minister of Zimbabwe in 2018, the former banker took on the daunting task of crafting a recovery plan for the moribund economy.
He pursued the tried-and-tested Bretton Woods monetary and fiscal order, helping our neighbour run a budget surplus for the first time in a decade. He stopped printing money, which had led to hyperinflation of more than 500-billion percent in 2008.
Other than that, he has very little to show for it. The country is facing its worst economic crisis in a decade as it grapples with daily power cuts of up 18 hours and shortages of everything from bread to petrol.
It is easy to sympathise with a critical mass of citizens who have been taking to the streets of Harare and Bulawayo since August 16 to express their discontent at the deteriorating economy, which the IMF said would contract in 2019 for the first time since 2008.
For a start, Ncube — a former chief economist and vice-president of the African Development Bank — should not have supported the idea of scrapping the use of the US dollar as legal tender to encourage a wider take-up of its recently launched local currency.
Zimbabweans are to yet to have faith in their country’s economic policies and its currency, and efforts to boost confidence through regulations and restrictions have not proved successful in the past.
In June, when Ncube made the RTGS dollar the sole currency, the local currency had been hitting new lows on the black market, trading at between 10 and 12 against the US dollar, versus a level of about six on the official interbank market.
So enforcing the zollar, as the new currency is called, by outlawing alternatives that also include the rand stoked panic and led to price increases that stirred memories of the hyperinflation of 2008.
Inflation has been steadily increasing since late 2018. It was recorded at 42% at end-2018 and six months later, in June 2019, it soared to 175%, almost double the rate in the previous month, hitting the highest rate since runaway money-printing and hyperinflation forced the country to abandon its currency in 2009.
The price increases reflect the rising costs of basic goods, from sugar and cooking oil to building materials and petrol, as these are mostly imported.
It appears as if the country’s leadership does not think the 175% inflation rate is a true reflection of the conditions on the ground. It has suspended the release of data for the next six months to collect comparable data since the introduction of the new currency.
The decision brings countries in crisis to mind: in 2017 Venezuela stopped publishing money supply data, more than a year after it suspended issuing inflation data, while Argentina was censured by the IMF for publishing questionable inflation data.
Venezuela is one of the world’s worst-performing economies due to the unravelling socialist economic system in which many people struggle to get food and medicines. Analysts are worried Argentina is on the brink of a sovereign default after its capital markets went on a free fall following the primary election loss of business-friendly incumbent Mauricio Macri in August.
Fixing Zimbabwe was always going to be tough for Ncube, who is part of a relatively new team led by President Emmerson Mnangagwa, a ruling party veteran who replaced longtime leader Robert Mugabe after an army coup in November 2017.
But Ncube is making the worst of a bad job.
He told news agencies in July that the government was ready to hike civil servants’ salaries for the second time in three months because incomes had been eroded by soaring inflation.
Pretoria is a long way from Zimbabwe, figuratively and literally. But failure to move quickly on state-owned enterprises and the public servants wage bill could soon make finance minister Tito Mboweni’s job trickier.