By Alois Vinga
Top economists have warned government against continuous use of temporary measures in resolving economic problems.
Speaking to NewZim Business in seperate interviews at the weekend, economists Persistence Gwanyanya, Godfrey Kanyenze, John Robertson and Prosper Chitambara said such strategies will only complicate the problems.
Gwanyanya argued that while the recent rate hikes were panic driven, resulting in the move by government to force the closure of suspicious bank accounts, the solution is of a short term nature.
“It is time we address the fundamentals because if we did not have increased money supply and excess liquidity, exchange rates would not rise to such levels. The fact that we currently have $15 billion in local currency against US$1.2 billion in FCA nostro is clear testimony that some underhand dealings are going on within government and the Reserve Bank of Zimbabwe,” Gwanyanya said.
RBZ on Friday announced a freeze on accounts held by Sakunda Holdings owned by petroleum mogul Kudakwashe Tagwirei.
Gwanyanya said government must not create loopholes which lead to the depreciation of exchange rates as they leave prices on the high end and erode market confidence.
“It is time to pay attention to permanent solutions to our problems and abandon the current short term stop gap measures,” the economist said.
Another economist, Kanyenze said since 2017, President Emmerson Mnangagwa’s administration has been handling the economic problems in an inconsistent manner.
“The measures are either too little or undertaken too late and sometimes ill planned. The alleged moves to freeze bank accounts and Ecocash Agent line funds indicates the lack of careful planning and logic in addressing the problems at hand,” said Kanyenze.
He said government is now desperately waking up to the reality of a teetering economy with exchange rates quickly depreciating beyond anticipation.
The veteran economist queried government’s failure to deal with known culprits fueling the exchange rate market and creating distortion in the economy.
“The only solution is to find a lasting solution by ridding the country’s institutions of these cartels, restoring confidence and truthful confrontation of the problems bedeviling the country,” Kanyenze added.
Commenting on the recent developments, economist John Robertson said that while it is too early to determine the recent interventions, the quick responses which have seen exchange rates tumbling indicate that big companies in the country are participating in the parallel market.
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Robertson also raised serious concerns on why it took government a long time to take this action despite knowing the culprits behind the scourge.
In his assessment of the situation, Chitambara said no lasting solution will be achieved without a clear appreciation of the root problems hidden in the existence of a deeply informalised economy.
“When 95 % of the economy is informalised, it means that speculation and indiscipline is rife. There are a lot of underhand dealings in such a context and unless such problematic situation are addressed, government can never win the exchange rates war. Key economic fundamentals created through social dialogue must be urgently resolved in order to permanently solve the problems,” he said.