By Tendai Biti
EVER since Gideon Gono took office as Reserve Bank governor, the public has been told what a good job he has been doing – not just by the state media and some sycophantic acolytes, but by the
The reality is completely otherwise. Gono’s inconsistent, ill-conceived policies have been targeted at addressing symptoms, not the terminal economic diseases that Zanu PF has inflicted on Zimbabwe.
In failing to address the fundamentals, he has actually just made conditions in the economy much worse.
These are not just the views of an opposition party analysing weaknesses in the government’s position. The IMF, to which Gono has recently played such court, has in the reports released yesterday slated the role of the Reserve Bank in Zimbabwe’s continued precipitous decline.
The IMF predicts that real GDP will contract by 7% per annum and that inflation will reach 400% by the end of the year. So much for the Gono “turnaround” and for the 80% inflation rate he promised by December – inflation being the “number one enemy” that he claims to be fighting.
Why is the economy collapsing for the seventh consecutive year in a row only in Zimbabwe and not the rest of Africa and inflation accelerating?
The main culprits, according to the IMF, are the steep decline in foreign currency earnings and the lack of consistency in fiscal and monetary policy.
The failure to achieve an improvement in foreign currency earnings is attributed by the IMF to the RBZ maintaining an overvalued exchange rate regime which, even after recent changes, “remains highly restricted”.
Accelerating inflation is fundamentally due to irresponsible increases in the money supply, which the IMF says were “mainly due to the sharp increases in RBZ’s quasi-fiscal activities during 2004 and first half of 2005”.
Gono has appropriated to himself not just the whole spectrum of economic policy-making, but also its implementation – most notably in usurping the fiscal functions of the Ministry of Finance.
His hubris might have been justified if he had had the ability to formulate and execute a comprehensive stabilisation and recovery plan. Instead, the effects of the piecemeal policies which he has introduced, then changed, then reversed (as the IMF documents in detail in its Article IV report), have led to a situation where the country’s economic prospects could hardly be more dismal.
In the face of the extremely tough criticism of the governor that is contained in the IMF report, Gono seems like an errant schoolboy in his anxiousness to win their approval. As a result, he has paid US$120 million of IMF arrears (plus it was reported this week, another US$15 million) thereby depriving desperate Zimbabweans of fuel, food, medicines and other essentials.
Furthermore, the foreign currency was appropriated from the accounts of exporters, further undermining the willingness of the private sector to attempt to export.
This statement is made despite the suspiciously detailed defence about the origin of the IMF arrears repayment funds which Gono attempted to publicise through the ever-willing Herald.
At the best of times, the fungibility of money makes such defences meaningless. At the worst of times, which is where Zimbabwe is at present, such approaches makes clear the willingness of the authorities to engage in blatant lies in order to defend the indefensible.
Gono also tried to curry favour with the fund by introducing a dramatic tightening of interest rates and a sharp depreciation of the Zimbabwe dollar on the auction just before the IMF mission visited in August.
But without other elements of a coherent anti-inflationary package in place, in particular with the enormous fiscal and quasi-fiscal deficits fuelling dramatic money supply growth, these policies can only be self-defeating.
Higher inflation, lower export revenues, more shortages, more poverty and despair are what are in store for Zimbabwe as long as Gono remains at the helm.
Gono lacks both the capacity and the authority to formulate and implement the comprehensive macroeconomic and structural reforms that are needed to lay the basis for sustained recovery of the Zimbabwe economy. Before he can do more damage, pushing Zimbabwe’s hopes of economic recovery into an ever more remote future, Gono should have the grace to resign.
* Tendai Biti is MDC secretary for economic affairs.