Gift Phiri 11 March 2017
HARARE – Back in the days when the Soviet Union was still a communist
empire, its flagship broadsheet newspaper was called Pravda, or “Truth”.
But all and sundry knew it was a supplier of lies.
The credibility of Pravda was so small that those who bothered to peruse
it would believe unerringly the opposite of what it tried to report.
Zimbabwe is supposed to have learned many lessons from the collapse of the
But it seems Zimbabwe’s Finance minister Patrick Chinamasa has learned
nothing about the futility of lying about economic performance.
In a presentation to military officers attending Joint Command and Staff
Course Number 30 at Zimbabwe Staff College on Thursday, he claimed “the
country’s economic situation is gradually improving due to pragmatic
policies that the government has been implementing”.
He actually bumped up his economic forecast for 2017 by two full
percentage points to 3,7 percent from 1,7 percent and said the economy
will grow faster than expected by economists.
Judging from the content of his rosy speech, it is clear Chinamasa is not
reporting honestly on the state of the economy and actually invented a
more optimistic message.
At one level, Chinamasa’s desire to counter the pessimism about Zimbabwe’s
dying economy is understandable. In the last two months, the economic news
coming out of the crisis-torn country was both depressing and worrying: a
spectacular stock market crash, a sudden devaluation of bond notes, and
anaemic economic activities, suggesting the economy will miss the official
target annual growth for 2017.
But does Chinamasa actually hope to restore investor confidence by hyping
Zimbabwe’s bright economic future?
The answer is almost definitely not.
The cash-squeezed government – facing a critical funding shortfall to
bankroll its commitments, including its bloated civil service wage bill,
government workers’ pension contributions and medical insurance – is
turning to treasury bills (TBs).
This also comes as the new bond notes – ushered in to help address the
epic cash problems – are losing value dramatically, facing rejection and
US dollars have vanished from the open market.
With imports massively outstripping exports, businesses are mostly selling
their merchandise in bond notes, making it impossible to finance imports
using the surrogate currency, with an informal forex market now
discounting the bond note and the Real Time Gross Settlement (RTGS)
A key test will come when Zimbabwe reaches the $200 million bond notes
threshold backed by a facility provided by Cairo-based Afreximbank.
Yet Chinamasa rejected that the country faced liquidity challenges,
telling the Staff College that “the banking sector has remained fairly
stable with capital levels ranging between $40 million and $246,6 million
against a minimum of $25 million.”
At a time banks are plagued by long queues and have drastically slashed
daily cash withdrawals from $1 000 a day to as little as $50, Chinamasa
claimed: “Long queues outside the banks are being experienced
particularly during month-ends. Government is promoting the use of
electronic payments (plastic money) in order to reduce pressure on the
demand for physical cash.”
This also comes after government buckled under pressure from restive civil
servants and accepted on Monday to add an unbudgeted $180 million on its
$4bn 2017 budget in order to pay its 300 000 workers’ their long overdue
2016 bonuses – heightening fears the financially struggling government
could fund the 13th cheque using TBs.
The commercial paper is now among the biggest vehicle for State
fundraising and clearing its ballooning $10bn debt.
This comes as government this week paid the scandal-plagued State-run
pension fund, National Social Security Authority (Nssa), $181 million
worth of TBs, to clear three-year arrears after failing to remit its
contributions to the fund as an employer.
What Chinamasa seems not to understand is that current pessimism about the
economy has less to do with the recent spate of bad news than with the
policy inconsistency, lack of reliable data on the economy and the opacity
of Harare’s process of economic policy-making and its intentions.
Although it is doubtful whether government propagandists know it, the most
precious commodity in the marketplace is credibility. Sadly, what
government has done in recent months is to engage in acts that
systematically undermine its own credibility.
Exhibit A is Chinamasa’s Pravda-like version of economic growth data.
Another example is attempts at portraying the devaluation of the bond note
as a lie. Chinamasa’s counterpart, RBZ governor John Mangudya defended the
fiat currency last weekend, asking me: “Have you seen twin pricing in OK
(supermarket) or major outlets? Go to the formal market, there is no
weakening of value.”
This is an example of an ill-advised attempt to prop up a crashing
currency. These actions have seriously undermined the credibility of the
government and shaken the confidence of investors and business executives.