The instability of the macroeconomic environment in the country is a serious cause for concern and solutions should be sought as a matter of urgency.
Macroeconomics is a branch of economics that studies how an overall economy behaves taking consideration of the markets, businesses, consumers and governments.
Macroeconomic factors include inflation, fiscal policy, employment levels, national income, investments and international trade.
Businesses argue that the exchange rate is the most important determinant of an economy in the world and an unstable exchange rate is a deterrent to any form of economic growth in the world.
There are many determinants of the exchange rates and chief among them are inflation, interest rates, political instability, government debt, economic recession, confidence and speculation, terms of trade, current account deficit to mention just, but a few.
The volatility of the economic situation in our country is a cause for great concern.
Our country has been hit by terrible inflation which is now pegged at over 1 000%. That is a bad macroeconomic factor in a country that has many of the workers being paid in the local currency.
Prices are now beyond the reach of many and it is not a secret that the bread basket needs about $1,5 million dollars a month for a family of six.
- To or not to deduct Aids Levy from VAT in Zim
- ‘Inflation could shoot to 700% by April next year’
- Charging school fees in forex unreasonable
- New perspectives: Inflation control critical for economic growth
Keep Reading
With the official exchange rate now hovering around 1:9000, it means many people are getting salaries less than US$50 a month, a figure which is not enough to buy foodstuffs only.
A nurse who is renting two rooms in the high-density suburbs needs at least US$160 as rentals, US$50 as transport to and from work, US$100 for foodstuffs and toiletries before talking about school fees for children.
That alone is an insurmountable task for many of our civil servants who struggle for survival on a daily basis. The economic environment is toxic and the consequences are very clear on the overall performance of the workers as they lack motivation.
Brain drain has sky-rocketed in the last two years with the health sector losing more than 4 000 of its qualified personnel in the last 18 months. If worker migration remains unabated as it seems today, then delicate sectors like the health sector will bear the brunt of the migration in a significant way.
Dollarisation is the key at this juncture when inflation seems unstoppable. Advantages of this measure include the ability to trade in a currency that is stronger and more internationally recognised.
Interest rates are usually lower in a dollarised economy and investor confidence can be increased if there is currency stability.
There is a fair share of drawbacks from dollarisation and these include loss of monetary autonomy, seigniorage and a vital national symbol as well as greater vulnerability to foreign influence.
Many questions are continually posed to access whether dollarisation is now inevitable or not. The truth of the matter is that with the galloping inflation which is driven by an expeditiously increasing exchange rate, dollarisation remains the only foreseen option.
The country may not be very liquid to cater for all the operations but it is imperative to put aside our easily-manipulated Zimbabwean dollar.
It is not a secret that with the impending elections, the misery will be intensified as political uncertainty takes centre stage.
That automatically drives the exchange rate to unbearable levels, making lives more difficult for the majority in the country.
The health sector is grossly affected by the ever-rising inflation. It becomes useless to accept medical aid cards that are paid in the local currency if payments are made later as the norm with many medical aid societies that can go for 90 days before honouring the service providers’ claims.
The same people who are earning in local currency are forced to look for money on the black market in order to buy medication, get admitted in hospitals and undergo some surgical operations.
The cycle of indigence starts, continues, repeats and the unfortunate phenomenon is one of the biggest drivers of corruption in the country.
We all pray for peaceful elections. Our country has great potential to achieve an upper middle-class economy by 2030 if we all unite for the benefit of the nation.
With more than 60 minerals in the country, coupled by formidable agriculture, educated citizens, our country can become one of the fastest growing economies in the world!
