ECONOMISTS have warned that the economy is at a critical juncture, requiring stability through predictable policies, controlled inflation and a stable currency that fosters confidence among businesses and individuals.
The warning comes as businesses are choking with some opting for corporate rescue while others are closing branches due to high taxation, poor utility service delivery, exchange rate volatility and policy inconsistency.
The Reserve Bank of Zimbabwe’s plan to foster stability in the economy involves policy strategy focusing on price, currency and exchange rate stability.
“Confidence is built over time when businesses and individuals see consistency in economic policies. Stability means predictable policies, controlled inflation and a currency that holds its value,” economist Chenayimoyo Mutambasere told NewsDay Business.
“The issue of a multicurrency must be addressed. Having a local currency now hardly seems to be the right thing to do especially given the country is a net importer with dwindling reserves. Policy thrust must be focused on stability first.”
She proposed addressing the multicurrency issue, focusing on stability, controlling money supply growth without causing a cash crunch and ensuring government borrowing was not inflationary.
Mutambasere said there was need for a true market-determined exchange rate and called for a more transparent foreign exchange system to reduce speculation and volatility.
Economist Stevenson Dhlamini echoed Mutambasere sentiments, saying most Zimbabweans collective memory of economic trauma “requires extended periods of stability to overcome”.
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“The government should prioritise monetary discipline (money supply growth), fiscal discipline (low budget deficits) and institutional framework strengthening to foster confidence.”
He said the central bank was trying to stabilise prices, protect the currency’s value and manage exchange rates.
“I recommend interest rate targeting with clear forward guidance and open market operations calibrated to local market conditions that the bank honours timeously to bring price stability,” Dhlamini said.
“For currency stability measures, I recommend a structured de-dollarisation programme (similar to Peru’s model), building foreign exchange reserves and a clear communication strategy to create a buy-in.”
For exchange rate stability, he called for a managed float system.
Economist Vince Musewe said politics played a role in ensuring economic stability.
“We must, however, remember that monetary policy is only part of a cocktail of measures that builds confidence. Politics also plays a significant role,” he said.
“Stability is about the value of money, yes, but also about consistent policies, effective leadership and accountability, transparency, rule of law and fighting corruption.”
