Experts throw caution on economic interventions

By The Standard | Jun. 30, 2022

With huge disparities between the interbank and parallel market rate, FIA said it was most likely that those privileged with access to United States dollars would benefit, but any trade they will do on the black market would further hurt the economy.

BY MELODY CHIKONO LOCAL civic groups working through the Fight Inequality Alliance Zimbabwe (FIA) say any interventions to address the current socio-economic crisis in Zimbabwe must be measured against the extent to which they reduce poverty.

Their call came after Finance minister Mthuli Ncube on Monday released additional measures to stabilise the exchange rate and control run-away inflation.

FIA said while the pronouncement of measures to guarantee access to basic commodities like mealie meal and bread at reasonable prices were commendable, the forex willing buyer, willing seller principle was likely to be ineffective because of lack of public confidence in the banking sector.

“This (black market activities) has the potential to increase inflation, a situation that is prejudicial to the majority who are earning in Zimbabwe dollars and below the poverty datum line,” the civic groups said.

“It is factual that civil servants are part of the working poor citizens. In as far as the 100% increment of salaries to civil servants is acknowledged, this is likely not to spur any meaningful results to the beneficiaries but offer a temporary relief given the high inflationary environment.

“As of 27 June 2022, the official rate was US$1:$362,6 against the parallel rate of around US$1: $630. In the same month, inflation was recorded at 191%, way above the salary hike awarded by fiscal authorities,” FIA said.

Readmore. . .

Keep Reading

“Therefore, a salary increase that lags behind ever increasing prices cannot surely address the widening income inequalities and it means that public workers will remain worse off unless the government starts to give salaries pegged in US dollars to track exchange rate depreciation which is driving price growth,” the group noted.

FIA added that a salary increment without addressing the root causes of inflation was the same as dealing with symptoms and not the root cause of the problem.

Furthermore, it added that some measures announced by the minister to motivate civil servants, like housing loan facilities, have been on the cards for quite some time while some incentives like duty-free motor vehicle import for civil servants were not practical given the real value of their current salaries.

As such, FIA raised fears that such elusive schemes may end up being abused by the top brass in government without gain to those on a low salary scale.

“The government must therefore prove beyond any reasonable doubt its commitment to transform these into lived realities and not just political statements.

“The government offered to pay school fees for up to three biological kids for teachers with the current limit of $20 000 per child.

“Given the high inflationary environment, the government must make this facility flexible and subject to review to match changing currency landscapes.

“Also, the incentive should be alive to the fact that not all civil servants have children going to school while some are breadwinners taking care of kids from their extended families. As such, it must be extended to non-biological children, otherwise the incentive will bring no relief to some public workers,” FIA said

The fight inequality members include Zimbabwe coalition for Debt and Development (ZIMCODD), Zimbabwe Environmental Law Association, Poverty Reduction Forum Trust, National Association of Non-Governmental Organisations, Transparency International Zimbabwe, Centre for Disability and Development, Combined Harare Residents Association, Zimbabwe National Students Union and AAZ.