Arrest market indiscipline: Economists
Oliver Kazunga/Natasha Chamba, Business Reporters
ZIMBABWEANS should engage towards a social contract and instil discipline in the marketplace to prevent the country from plunging into a recession, economic analysts said yesterday.
Although Government has set the economy on a positive footing under its comprehensive economic reform drive guided by the Transitional Stabilisation Programme (TSP), poor rains experienced this season, devastating effects of Cyclone Idai and wanton price increases driven by speculative parallel market distortions, have slowed down progress.
Last week, the International Monetary Fund (IMF) expressed fears that Zimbabwe could slide into recession this year, a move that would likely dent the economic gains achieved so far under the TSP. A recession generally refers to a significant contraction in economic activity spread across the country.
Previously, the IMF had projected an economic growth of at least 4,2 percent this year based on the hope of a resurgent mining sector and an anticipated increase in foreign direct investment.
In separate interviews, economic analysts said urgent measure should be taken collectively in order for the country not to slide into recession. Prominent businessman and Zimbabwe National Chamber of Commerce past president, Mr Luxon Zembe, said:
“It is important for the nation to come together in the form of a social contract and agree as social partners between business, labour, Government and the civil society in terms of discipline so that we all agree that we adhere to a code of ethics, to a code of practice that enforces discipline in the market place.
“If we are to arrest these rampant price increases, which are obviously being driven by the unstable macro-economic environment and the uncertainty that exists in the environment, as well as the gap between the official exchange rate and the parallel market rate, we will avoid Zimbabwe from sliding into recession,” he said.
Mr Zembe highlighted that what was now happening in the economy in terms of price madness was an epitome of ‘a dog trying to chase its tail’, where the parallel market is now a runaway target. He said it was critical for the country to secure significant inflows of foreign exchange or the United States dollars into the official system to manage and arrest the runaway inflation.
“The exchange rate also has got a lot to do with the price increases that are taking place because of uncertainty that is being created where people are charging premium prices for the uncertainty because you don’t know what’s going to happen tomorrow,” he said.
“The Government should try and mobilise as much lines of credit if possible so that we improve the existing foreign exchange reserves in the country to stabilise the foreign exchange rate in the market.
“So, it’s important to have the lines of credit, balance of payments support and being able at least to ensure that there are sustainable. These once off injections really will not solve the situation because they will just stabilise for a few days. What is required is a more reliable and sustainable way of foreign exchange inflows,” said Mr Zembe.
Professor Ashok Chakravati from the University of Zimbabwe said: “What you are asking calls for austerity.”
Economist Mr Richford Madzetse said symptoms of a recession were usually spread across the entire economy and normally visible in real gross domestic product (GDP), employment, industrial production and wholesale-retail sales.
“During this period businesses will likely close down or cease to expand, rate of unemployment rises and housing prices decline,” he said.
Another economist Mr Goodwine Mureriwa said the problem with a recession was that it tends to cripple demand as consumer spending is reduced and forces business to scale down investment.
“This means there is less money in people’s pockets and less demand in almost all business sectors, which will lead to investors scaling down a notch,” he said.
Mr Mureriwa also said Zimbabwe should intensify austerity measures proposed by the Ministry of Finance in fighting the recession.
“Zimbabwe can be saved from this recession only if people cut down on luxuries as suggested by Professor Ncube and rather use the few available dollars to invest for the future and not now, something called cathedral investments,” he said.