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*It Will Not Work, Economists Tell Mthuli Ncube*

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Economic commentators have condemned the measures announced by Finance and Economic Development Minister Mthuli Ncube last week to stablise the exchange rate and prices of goods and services.

Some of the measures included the removal of duty on 11 selected basic grocery items, allowing businesses to keep 100% of their locally generated forex revenue, and a pledge to fine-tune the foreign exchange auction system so that it operates on a pure Dutch auction basis.

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Speaking to Standardbusiness, economic analyst Vince Musewe said Ncube’s measures are reactive and will not work. He said:

> An economy cannot be managed in a reactive mode from crisis to crisis, but sadly that is what is happening.

> There is no debate that Zimbabweans prefer the US dollar and those with US dollars will continue to demand a premium.

> Despite the country generating US$12 billion per annum, the appetite for the US$ dollar will never be satisfied and it is clear the informal sector does not react to economic policy measures but operates to maximise profits.

> This has resulted in a supermarket economy where everyone is selling some imported trinkets to make a living and importing basic goods kills local industry.

> The scenario has not changed where the rate goes up inflation goes up and the rate goes up creating a vicious cycle.

> It is time to realise that the dollarisation of incomes is the only sensible thing to do to cushion citizens.

> Salaries and wages must now be in US dollars and companies must freely charge in US dollars.

> The economy has rejected the Zimbabwe dollar; nobody wants it.

Confederation of Zimbabwe Industries (CZI) chief executive officer Sekai Kuvarika said:

> I think we need to give the stabilisation measures a chance before we destabilise the manufacturing sector by flooding the market with cheap imports.

> You also have to remember that these imports are coming from environments that are not the same as we are.

She said there was no shortage of basic commodities in the country.

Another economic analyst Stevenson Dhlamini said:

> It’s difficult to conclude whether they are effective or non-effective, but it’s showing that they are appreciating that we are in a crisis.

> There is a clause where the minister says he will increase the interest rates to curb inflation in the short term.

> My belief is that the interest rates and the parallel market have to continue to chase each other.

> The more you increase interest rates the parallel market simply increases its premiums to compensate for the higher interest rates.

> So the question can be: is the interest targeting the best or the most effective response at this stage or rather we should be addressing the sources of money supply growth?

Meanwhile, Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya said that the measures will support the issuance of gold coins and tokens by the central bank.

More: Pindula News

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