HARARE- The state media reported last night that the minister of finance has secured a bridging loan meant to cover up Zimbabwe’s negative external trade position. The gap has become so wide that by half year of 2018 Zimbabwe had already incurred a deficit equal to that incurred for the whole of 2017 at $1.7 billion. This in simple terms means we can no longer sustain our imports as forex receipts come short of imports demand. In real terms imports exceeded exports by $1.7 billion as at half year which puts more pressure on the country’s nostro and the general price of goods in the economy. Essentially Zimbabwe is importing way more than it exports such that shortages of forex have become so pronounced.
What was striking about the state media article is a direct reference and attribution of the deal making to the new minister of finance who is barely 2 weeks old into his hot portfolio. This points to a sense of desperation on the part of authorities, trying hard to prove the significance of Mthuli. The state should simply shut up and let the man do his job and also let yesteryear propaganda be a thing of the past if the country is to redeem itself out of the economic mess.
Bridging finances on the imports side are not a new thing for Zimbabwe, since 2016 Zimbabwe has been securing nostro stabilization facilities to help ease the forex crisis and ensure adequate supplies of necessary imports, settlements of international obligations etcetera. As per mandate the monetary authorities RBZ was credited and also took it upon the institution to update the citizens. The latest stabilization facility was a $600 million finance secured late in 2017 from the AFREXIMBANK which has since been fully drawn down.
In essence these facilities need not be publicized as is the present norm. The secured flows are not meant to capitalize the economy as is the case with foreign direct investment, targeted funding, concessionary lending from multilateral lenders and receipts from Eurobond issues. The quantum of flows, the duration and the cost are all at variance with these short term cushion funding Zimbabwe is seeking and writing home about. The publicity stunt, which is meant to reduce speculative behavior on the parallel forex market, often achieve different results. Continual publicizing of the monetary mess serves to remind rent seekers and the general populace of the gravity of problem and that essentially sustains speculation. Rates remain soaring and are currently sitting at a reported 100% premium for the RTGS/USD pair.
The new minister should not therefore seek to confine or associate himself in the small men league. The populace is anxious, the economy is bleeding and desperate, the time is now to rise to the occasion and deliver a sound macroeconomic base which is easily reflected on the monetary side of the economy. It also follows that most of the monetary challenges such as the prevalent cash crisis are symptoms of a weak fiscal position. Although stabilization is needed it need not be flaunted upon as if it is the real deal, because it only means we are cooling off a symptom.
Save to mention the costs associated with the stabilization facilities and their impact on the fiscus through interest payment or if otherwise on the cost of production. Borrowing offshore as we are presently doing with these stabilization facilities to subsidise consumer goods is a cost that cannot be sustained, the Venezuela case is a good case study in recent periods and indeed we have walked this road before, it never works on a sustainable basis. The time is now, the sacrifices have to made now and the Minister need to act, or risk falling into oblivion as some of his pretending predecessors.
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