Editor’s Memo

Conforming against principle

THE people of Zimbabwe should be grateful to Finance minister Herbert Murerwa for forcing a disclosure of the murky operations of the cabinet. It’s not a pretty picture.

After Murerwa called for an end to the Reserve Bank of Zimbabwe’s “quasi-fiscal operations”, RBZ governor Gideon Gono was forced to make a detailed rebuttal saying he was following instructions issued by Murerwa according to the Reserve Bank of Zimbabwe Act.

The truth is that Gono was not acting unilaterally nor was he doing anything illegal. He was obeying instructions from Murerwa which, based on the principle of collective responsibility, means Gono was following cabinet instructions regardless of whether Murerwa supported them or not. It is a picture of a government in total disarray.

What we find astounding is that both Gono and Murerwa authorised the financial disbursements which they were fully aware were outside the national budget and therefore against all known principles of accounting. These are aberrations that go beyond legality. There are things called principles in every field.

The disbursements expose a government that has run out of resources but will not admit its policy failures. From the correspondence between the RBZ and the Ministry of Finance one is left in no doubt that we are a country facing a dire national emergency yet in public an illusion is created that there is no crisis, only “challenges”.

The land reform programme was badly executed and is the biggest cause of the negative supply side response that has hit every facet of the economy — from capacity underutilisation in industry to food shortages. The demands for winter wheat financing and the repair of irrigation equipment only confirm this. But there are no resources and the Reserve Bank is forced to literally “pluck dollars” from trees to meet executive orders to provide money — hence Gono’s painful observation that “quasi-fiscal operations are a necessary and unavoidable feature of crisis periods”.

What we still find unbelievable is that while cabinet was making these irrational demands on the Reserve Bank, Gono pretended it was still possible to meet his fantasyland inflation targets. How do you achieve that when you fund the Grain Marketing Board’s purchase of wheat from farmers for $237 913 per tonne and then sell it to millers for a paltry $12 339? True, this might not be “bookish economics” but it looks worse in terms of attaining the Reserve Bank’s own targets for inflation and the Ministry of Finance’s estimates of expenditure. Populist policies are the enemy of financial prudence and we have become past-masters at spending what we don’t have.

Murerwa might have suddenly realised that what cabinet was doing was making the economy worse but the truth is that it was him and Gono who played truant, for the Reserve Bank of Zimbabwe Act is very clear on the role of the central bank and the powers of the governor. The Zimbabwe dollar has lost all integrity as a medium of exchange under Gono and Murerwa.

More than that, the public spat between Gono and the Minister of Finance has only strengthened the perception of a dysfunctional government. While Gono must take his orders from the minister, President Mugabe had no hesitation in supporting the governor against his cabinet minister by attacking as “nonsensical” and “bookish economics” Murerwa’s criticism of the RBZ’s quasi-fiscal operations. In other words Gono can print as much money as government wants and debase our currency as much as he wants so long as these activities purchase government another day in power. Where has devaluation ever worked when you have nothing to export and a million things to import?

At the national level, these policy contradictions have been more damaging. They expose the need for an autonomous Reserve Bank whose operations are not subject to the caprices of delinquent politicians.

There is a clear case of Gono “conforming against conviction” in most of his quasi-fiscal operations because they are all against his inflation targets, his turnaround aims and prudent government expenditure. There is no point in holding a principle if you can’t say “No” to wrong instructions even if they are legal. Which is why failure has become more than just a perception.

In response to Murerwa’s strictures on the RBZ’s quasi-fiscal operations, Gono said there was no point in “conforming without conviction”, which I took as a rebuff of Murerwa’s position. But that is what he has been doing printing money to support government’s over-expenditure which feeds his number one enemy — inflation. Unless he wants to tell us he is “convinced” that is how the best economies are run, in which case we plead for God’s mercy.

The result is that the nation has been subjected to a lot of duplicity and political mendacity characterised by a bewildering rapidity of policy changes. The aim is to confuse the nation while selling the charade that somebody is dealing with an economic crisis that has left Zimbabweans poorer than has ever been recorded.

Gono’s implausible excuse for his interventions is that he doesn’t want to play the “blame game”. He says he wants to get the job done and avert a national disaster. But that assumes that the nation has limitless resources, a negation of the foundation on which economics as a study is based.

The philosophical basis of that position is amoral. It is to invent a blanket excuse for failure to perform, a form of blackmail to others that if you expose me I will expose you. It is a refusal to account for the use or abuse of national resources. How is such a principle compatible with his position that as a bank they require borrowers to account for all the money they get from the RBZ?

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