Zimbabwe crisis: Confidence is the missing link


The sentiments in the economy are such that there is no confidence in the system governing the country.

At each turn economic agents are anticipating for the worst and this is driven by a lack of coherence and budgetary indiscipline on the part of the government among other issues, not social media.

The prevalent market discount rates for RTGS and other forms of payments have effectively eroded constant GDP so is real income for all individuals.

For example if Zimbabwe’s GDP was measured at $16 billion in 2016, that value today will be much lower at say $12 billion after discounting for market vagaries.

Of interest however is the causative of this erosion that has led to sharp discounts or premiums (depending on the angel one looks at) in publicly traded shares, TBs and other money market instruments.

These discounts are reflective of expectations of a gloomier outlook as deduced from various perspectives.

Market players have closely been tracking government debt and money supply levels to determine the outlook while general economic participants have been watching the supply of bond notes to inform the outlook.

All these aggregates have pointed upwards in turn spurring the propensity to discount.

Government’s domestic debt has been partially financed through TB issuance in turn increasing local money supply in the economy which is barely backed by real money.

The government should adopt confidence building measures in order for the economy to realize its potential through growth.

These confidence building measures should be premised on transparency, fiscal discipline and policy consistency among other measures.

It starts with streamlining of government operations, engaging and consulting on budgetary issues, allowing the public to review the implementation of budget and the adoption of consistent policy measures.

A mere pick for a critical portfolio such as Finance should equally be targeted at stimulating populace and business confidence, through a good record, which is the missing link.

The envisaged growth will therefore not be achieved in isolation, rather a lack of confidence will discount the growth and the net may turn out to be negative.  

By Respect Gwenzi  for The Source


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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