‘ED measures show desperation’

Source: ‘ED measures show desperation’ – NewsDay Zimbabwe

BY KUDAKWASHE TAGWIREYI/TAPFUMANEI MUCHABAIWA

THE latest measures by President Emmerson Mnangagwa to halt  the sliding Zimdollar are an act of desperation and are not likely to work, analysts have said.

Mnangagwa’s measures include breaking the ill-advised monopoly in public transportation and suspension of bank lending, among others.

Economists, however, said the move by the Zanu PF leader was a desperate attempt aimed at diffusing nationwide protests call for by pressure groups.

Economist Victor Boroma said that the suspension of lending by banks and the micro-finance sector was going to have a damning effect on the financing of small and medium enterprises in Zimbabwe.

“Suspending lending by banks and microfinance institutions will negatively affect the financial institutions and it will dent businesses that rely on borrowing for short-term financing and operational needs. In a way it is counter-productive,” Boroma said, adding that the central bank was evading real matters.

Citizens Coalition for Change (CCC) interim vice-president Tendai Biti described Mnangagwa’s move as self-defeating and unwelcome as it could ignite a raft of litigation.

“The regime has announced a potpourri of contradictory, self-defeating, punitive and vindictive measures with the intended aim of stopping or reversing the dramatic and lumpatious free fall of the Zimbabwean dollar and the consequential inflationary spike experienced in the last two weeks.

“It is blatantly unlawful to ban banks from lending when it is their core business. We now await the legal instruments necessary to effect the above measures. Massive litigation is inevitable. The new taxes and proposed civil penalties are unlawful,” Biti said.

Economist Eddie Cross, however, said this was a measure to counter parallel market activities.

“It is an attempt to stop activities (on the parallel market) and the use of the parallel market rate by the retail sector to determine prices,  I think the fundamental point being made by the statement is that this is unwanted given that our economic fundamentals are sound.

“The query now lies in the actions they are taking to try and implement that decision. One of the people I have talked to stated that it might work, but I would have preferred a more radical and much more straightforward package of actions,” Cross said.

“I think this is compacted, it involves a mixture of different approaches and for that reason, it may not achieve what they are hoping to achieve,” Cross said, adding that there was need to take a more radical approach to the issues confronting the economy.

“Without doubt, the package will strengthen the Zimbabwe dollar and I think this is the position of the government and I don’t see us dollarising again, but when you adopt a mixture of approaches to the problem you run the risk that the package won’t work and that is critical,” he added.

However, Confederation of Zimbabwe Retailers president Denford Mutashu welcomed Mnangagwa’s move, saying it was a bold and noble move towards defeating inflationary pressures caused by parallel market rates.

“The move by President Mnangagwa is progressive in that it will help curb the inflationary pressures and also outdo the parallel market. Creating space for the local currency is key,” Mutashu said.