A Laboratory Of Economic Experiments - Exchange Rate Reforms & Inflation

Robert Mugabe the liberator turned benevolent dictator no longer has any moral license and cause to continue to steer the Zimbabwean ship in the stormy and mucky waters of globalisation. It is clear that the national challenges we are facing require that we assemble an 'A-Team'. A team whose construct views the world from a perspective different from that required in prosecuting liberation wars because the challenges facing the nation and the environments are now diametrically the opposite to those that were obtaining during the liberation struggle. Zimbabwe urgently requires a leadership blend of seasoned politicians, diplomats and technocrats. At 84 years old Robert Mugabe no longer has anything new to offer after leading the government for the past 28 years. From the Malaysian economic survival plan whose underpinnings was based on a fixed exchange rate to the current orthodox and free-floating exchange rate reforms, Zimbabwe has become a mere laboratory for economic policy experiments. The latest free-floating exchange rate policy was necodemously stolen through 'cutting and pasting' from solutions proffered by both business and the opposition MDC. The policy was conceived and implemented in a vacuum yet its capability of steering and revitalising Zimbabwe lay in it operating within a package of supporting measures. The free-floating exchange rate and inflation is another typical failure of the Junta; it has worsened massive suffering, with prices skyrocketing daily as business chase the prevailing exchange rate. The crisis has destroyed the social fabric, with hospitals operating without key drugs let alone the critical staff needed, and teachers have engaged on a permanent go slow in protest that their salaries be linked to the exchange rate. This is the final nail to the Junta; it can no longer survive beyond the presidential June 27 runoff. The correct prescription and measures would have been to implement a free-floating exchange rate and then support it through availing foreign currency to key institutions whose products/services are consumed by the most vulnerable in society. The underlying idea is to stimulate the inflow of hard currency from foreign direct investments in particular from sovereignty wealth funds, aid and grants, remittances from abroad, and help to stabilize the value of the dollar against major currencies. This will tame inflation factors driven by foreign exchange shortages. At the core of this policy reform is productivity and a production drive from industry, mining, tourism and the agricultural sector. This supply side approach will help the nation to trim its import bill (since imports will be more expensive) and deflate the black/parallel market, which is partly responsible for speculative activities running riot in the economy. The current thrust of the policy only benefits fat businesses through enhancing international competitiveness. The overlooked fact was that there could be no policy success without a balanced trade off between the needs and wants of the broader society. Workers in particular the lowly paid civil servants and other vulnerable members of society have emerged injured in the battle for economic recovery masterminded by the unpopular Junta. Yet basic facts are that social cohesion should be at the core of any successful national strategy or policy. The rate of the dollar against major currencies has continued to slide further even if there are no inflows of funds into the interbank system. This point to the fact that our demand for funds is high against our supply for the funds further highlighting that rationalising the supply side of the economy is critical for any exchange rate reform success. Inflation and the exchange rate have emerged as major drivers of inflation with Zimbabwean businesses resort to opening trading after 9am and closing trade at 3pm after factoring in the current exchange rate. This has left the economy experiencing high menu costs, with prices incrementally changing hourly and daily. The lessons from these failed exchange rate reforms point to the fact that Zimbabwe needs a new government which is capable of negotiating a recovery package from any possible willing foreign sources. It has been proved beyond doubt that Zimbabwe lacks the strategic capacity to recover without international support. The current governing Junta lacks the international goodwill; astitute politicians, seasoned diplomats and technocrats that can propel further our national cause. Our rare circumstances both past and present, call on all responsible citizens to vote wisely in the coming presidential run-off. It is my considered view that no single individual can pull this country out of the mucky it is in. Only a collective leadership of our most brilliant and moral politicians, diplomats and technocrats can salvage this country. One only needs to analyse the current events both in and outside of Zimbabwe to be able to see that Morgan Richard Tsvangirai indeed is a viable incumbent who has the capacity to assemble a leadership team that can salvage us. Come 27 June 2008, my vote goes to the young and brilliant Morgan Richard Tsvangirai who I'm confident has the capacity to assemble a team that advances our national cause.   Hillary Kundishora

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