The new measures include the elimination of administrative hurdles of contracting offshore loans, resuscitation of the credit guarantee scheme to enhance local production by small to medium scale enterprises, putting in place nostro stabilization facilities to deal with delays in the remittance of outgoing foreign payments, promotion of internal devaluation using market-based mechanisms to restore competitiveness in the national economy, and encouraging the fast-track elimination of bottlenecks that are hampering the ease of doing business within the economy especially in the export production sectors.
The measures and policy advice which are well aligned to those presented by the Honourable Minister of Finance and Economic Development in the Mid-Term Fiscal Review Statement are designed to deal with the structural imbalances that continue to stress the economy.
The structural imbalances are evidenced by the large current account and fiscal gaps generated by the difficult internal and external conditions, a legacy of dollarisation policy inconsistencies/contradictions, policy slippages and procrastination in the implementation of critical Government policies.
These imbalances are further exacerbated by adverse weather conditions and weak investor sentiment leading to the under performance of the national economy.
The under performance of the economy which started in 2012 – three years after dollarisation – is also greatly attributable to the legacy of policy inconsistencies/ contradictions when the country went into dollarisation in March 2009, by default and not by design, to tame hyperinflation.
This was soon after the formation of the Government of National Unity in February 2009. The policy inconsistencies/contradictions which were secondary to the political settlement include over liberalisation of both the current and capital accounts at a time when the country had very limited access to foreign finance due to debt overhang, and non- conducive investment climate due to sanctions and unattractive domestic investment policies; wrong choice of trading currency and; failure to benchmark with regional comparators to maintain competitiveness.
It is therefore a combination of the current internal and external imbalances and historical challenges that need to be urgently addressed for the proper functioning of the multi-currency exchange system that, de facto, is currently totally dominated by the use of US$.
This situation requires the nation to do things differently and WALK THE TALK to transform the economy by changing the narrative from consumption to production. The economy is hungry for production and productivity.
With the public sector wage and salary bill being one of the highest in the world at more than 90% as a share of fiscal revenue and inflation at -1.4% being low or in negative territory (deflation) for two years now since 2014, real wages and salaries have increased, crowding out capital and socialexp enditure – thus undermining the economy’s capacity to enhance employment and to be competitive.
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