Mthuli Ncube laments indisciplined speculation

FINANCE and Economic Development Minister, Professor Mthuli Ncube, says the wave of price increases being experienced on the market and the wild parallel market exchange rates have no economic justification as Government has successfully managed to stabilise the fundamental fiscal elements that previously fuelled inflation.  

Addressing industry and commerce executives during the International Business Conference (IBC) in Bulawayo yesterday, Prof Ncube lamented the level of indiscipline in the market, which he said thrives on speculative sentiments. He said such behaviour was far from ethical and standard economic practise and as such was creating a negative economic environment for the whole country.

"We are doing very well on the fiscal front, Honourable VP (Chiwenga), your Government is solvent, we are running surpluses and we have been doing average surpluses of $100 million since September last year when we came in. In January we had surplus of $102 million, February $85,5 million as we had to take into account cushioning of civil servants. In March our surplus doubled to be just about $200 million," Prof Ncube said.  

He said Government finances were sound and money supply was not growing.  "So, where is pressure on the exchange rate coming from? Before we knew that it came from the fiscus, we were monetising the fiscal deficit and then money supply would grow but now where is the pressure coming from? So, clearly as the VP said, it is speculation and that speculation is not a good idea, we know who is driving it.  

"Our job as Government is to make sure that our fundamentals that determine value of a currency are still strong. We are not careless in terms of how we spend and we make sure the value of the currency is preserved but you (businesses) should meet us halfway," saod Prof Ncube.

He said Government was forging ahead with implementation of painful but necessary austerity measures as building blocks towards desired prosperity.  Minister Ncube assured the nation that the period of austerity will be short and certainly not exceed one year as the positive fruits of belt tightening were already being realised.

"We need to go through some period of austerity as we build towards prosperity. But quite clearly you can't do austerity for three years, that's bad, do it one year and move on, he said. Prof Ncube pleaded with businesses to be patient and desist from wanton price increases and profiteering as Government puts in place the building blocks.  

"Please, it is bad economics, very bad economics where you tie price increases directly to the exchange rate. Good economics says tie prices around a consumption basket, you don't earn your salary to go and buy US dollars. So, inflation thinking should be hinged around consumption basket and not US dollars," he said. "Above all, make use of this interbank bank market, we have created it for you."

Minister Ncube said key pillars towards the desired transformation included among others infrastructure development, strengthened governance, improved democratic space, improved social services, strengthening of public institutions, improved ease of doing business climate and fighting corruption. He said what was encouraging was that Government had so far made great progress towards achieving these goals.

Prof Ncube said the Transitional Stabilisation Programme (TSP) was a short term blue-print that has a mandate to stabilise economic fundamentals before its long term successor policy guidelines take shape. He said going forward the upper middle class vision targets per capita income level of US$4 500 by 2030 and a long term Gross Domestic Product of US$65 billion from the current estimate of $25 billion.  

The Minister said his dream was that of a Zimbabwe that is a factory for Africa and a gateway to the world.  He said the ongoing reforms should yield quick wins, including setting up of one stop border posts at all the country's ports of entry where it should take at least 10 minutes for visitors to cross. Prof Ncube said measures were also being put in place to clear both domestic and foreign debt so as to unlock fresh lines of credit.  

In the interim, he said, Government was engaging other partners seeking to raise financial resources to oil the productive sectors and broaden the job market.

Prof Ncube stressed the need to revive the manufacturing sector so as to curb raw exports saying solution to current account deficit lies in value addition and beneficiation to earn higher value on forex market.