The Governor of the Reserve Bank’s first Monetary Policy Statement for the year 2023 raised key substantive points in respect of our economy. For that reason, the governor’s Monetary Policy Statement deserves further reflection and interrogation. I have decided to devote my piece for this week to share with our nation my own reflection on this loaded monetary statement.
The Economy is Robust
Set against likely trends in the global economy, the Governor’s statement confirms that Zimbabwe’s economic activity remains robust, supported by strong foreign currency receipts.
It discloses that our total foreign currency receipts reached US$11,6 billion in 2022, the highest ever in the history of our country, and certainly since our Independence. The country’s balance of payment position remains in surplus position, driven by robust export performance and remittances.
Our foreign currency receipts of more than US$11,6 billion serviced our external payments of about US$8,6 billion, thus leaving us with a healthy surplus of US$305 million.
Diaspora remittances increased by 14 percent in 2022, to US$1,66 billion. The foreign currency auction backlog meant to support business has been cleared, while the willing-buyer, willing-seller mechanism is working very well, and reinforcing the foreign currency auction system.
Both will continue in 2023, thus ensuring greater access to foreign currency for the business sector.
Sustainable Growth Path
The rains have favoured us. This, alongside the extensive climate-proofing measures we have adopted as an agriculture-led economy, means we are set to have a good season, itself a key factor to our overall growth. The mining and tourism sectors are doing very well, thus making our growth prospects not just good, but also quite sustainable.
Our banking institutions are in fine fettle. Our financial market is growing in depth, with new instruments being brought to bear, and making any surpluses investible. In this regard, the introduction of gold coins has been outstanding.
To date, some 28 000 coins have been sold, raising some $22,2 billion, or US$27,5million. Until now, all this money was either stashed at home, or was wreaking havoc in our economy through illicit parallel market-related activities.
Inflation continues to come down
Month-on-month inflation, which peaked at 30,7 percent in June 2022, decelerated to less than 2,5 percent by end of 2022. The upward trend of inflation has now been checked, with current efforts focusing on bringing it down even much further. The exchange rate has largely stabilised, putting aside temporary instability late last year triggered by payment to our farmers.
That we are on course, and that the outlook is sustainably good, showed by way key relaxation measures and concessions the Governor made to businesses, and to the general public.
That is as it should be. Every gain we make as an economy must translate to a better operating environment for businesses, and to improved welfare thresholds for the generality of our people.
The positive balance must grow the economy
Amidst all this good news, there are issues and concerns which we must continue to keep an eye on, and even address as an economy. First, the more than US$300m positive balance between our foreign exchange receipts and our external payment commitments must continue to be monitored so they do not upset the applecart.
I am aware that over 70 percent of domestic transactions are in US dollars and cash-based. That, in part, explains where this surplus is, and what it is doing in the economy. I urge both the fiscal and monetary authorities to jointly ensure this huge amount remains in lawful circulation and positively used at all times. It should never live and operate in the twilight of national laws and national transactions.
Re-imagining inflation
Second, as the Monetary Policy Statement admits, a mere 30 percent of national transactions are reckoned in local currency.
Yet our conceptualisation and reading of inflation tends to be based on this small segment in the total matrix of national economic activity.
This distortion unhelpfully overlooks what happens to 70 percent of transactions in the economy, all of them done in United States dollars!
I urge both our fiscal and monetary authorities to re-imagine this one critical area so we do not continue to stoke up negative expectations on inflation, which are not justified by realities of transaction in the economy.
Would a blended reading of inflation not be far better and representative in guiding the whole economy, behaviours and expectations around our economy?
Harmonising ZSE and VFEX
Third, I am exercised about the unfolding relationship between the Zimbabwe Stock Exchange, ZSE, and its sibling, the Victoria Falls Stock Exchange, VFEX. Instead of a relationship of complementarity, I am beginning to sense that businesses are delisting on one to re-list on the other.
This may very well relate to discrepancies in incentives we have attached to either of the bourses.
In an economy which is fighting off negative speculative behaviours, this might not be very helpful.
Again, I urge the authorities to apply their minds on this growing chasm between these two bourses so they complement each other, for the benefit of our whole economy.
What is our real worth?
Fourth and last, I am far from being convinced that the current size of our economy, which is put at between US$26 billion and US$27 billion, does justice to our real worth.
My hunch is a lot of value remains uncaptured and thus unstated or understated. For instance, how is the informal sector accounted for in this global value?
Anything less will suggest that the country is not being built by those previously disadvantaged by colonisation but by a privileged few in the formal economy. We need a new template for a new, ever transforming economy!
President Emerson Mnangagwa is Zimbabwe’s Head of State. The article reflects the author’s opinions and not necessarily the views of The Southern African Times.
