The ‘fiscal shock’ will catapult Zim out of the quagmire

From Page 4 there and active and know what was happening. We have the best education in Africa and the best human capital. So a private sector led economy is what we are pursuing.

Let me take you back to the other pillar of the transitional and stabilisation programme. The other pillar is on the currency front. The action that we have taken of introducing Foreign Currency Accounts. What problem are we trying to solve? There are US dollars everywhere and people are bypassing the banking system. So how do we make sure that people begin to put their money back into the bank? We open FCA accounts and make sure that this money is available when you need it and we put a guarantee into it. Hopefully, first of November you and I and all of us do that and then test the system and make sure that the money is available.

So these are simple micro issues. But then in the TSP, we go into the sectorial issues, support for agriculture to ensue food security for Zimbabwe. We want to make sure that it’s supported but now working with the private sector and banks. Then there is support for the mining sector. All the local beneficiation that is being proposed by the Ministry of Industry, we support that. Infrastructure investment and promoting public- private partnership. We also need to continue creating a conducive environment for doing business. We need a one-stop shop to make it easy to register and start a company. We will also have a monitoring tool to monitor progress in each area. All of this put together is what we need to move Zimbabwe into an upper middle-income country by year 2030, which is the vision of the President.

LRM: But you are saying priority is debt clearance?

MN: It is debt clearance and fiscal issues. Those two together because that’s what really creates stability. Fiscal then leading into monetary.

LRM: You mentioned in one of your interviews while in America that Zimbabwe needs a “fiscal shock” which will be for the short term. Can you explain why you are so confident that these challenges will be short-term?

MN: It’s certainly short term. It works like this, you don’t want the pain to be longer than 18 months because then it becomes permanent. So it’s short to that extent that we need to create stability. People will feel the pain for the next 18 months but within that period we should really have front-loaded all the things we needed to do to stabilise the economy. I am confident about that. Fiscal stability is about closing that budget deficit and that will be done within the two-year period. Then we look at arrears clearance. I have already told you that this will be done within 12 months.

LRM: What is your comment on the issue of price increases?

MN: The market will correct itself. However, I think we also need to be responsible as the media, as communicators and be cautious in how we frame our stories. We need not cause unnecessary panic. Some headlines are so misleading that they cause panic. People then speculate and instead of buying one bottle of cooking oil, they buy two thinking they might not find the product the next day. Demand rises and this causes empty shelves. However, I am confident that this is just a passing phase.

LRM: Let’s talk about banks. There is very low confidence among people in our banks. What measures can be put in place to restore confidence of people in the country’s banking sector?

MN: Banks are making money because they are buying treasury bills and not lending. All you are doing is funding Government but not funding the rest of the economy. So how do we build confidence? It’s through recapitalisation. If you look at the Monetary Policy Statement, we say by 2020 the capital base must be $100 million.

LRM: What is your relationship with the RBZ Governor? Do you think your economic model is in sync with the state of affairs at the central bank?

MN: Naturally, RBZ is one of the economic institutions that fall under me. So yes, we work very well. Of course the bank is presented with issues as they are and I work closely with them to try to move to the next level to improve things. So we move in lock and step. We have excellent working relations.

LRM: How do you feel when some people view you as the “knight in shining armour” coming to rescue us from economic hardships? Does this weight of expectation weigh you down?

MN: I wish the phrase “knight in shining armour” would not be used. But frankly it doesn’t weigh me down. Naturally, I am a very passionate person. I am a very determined person, always passionate about what I choose to do at any moment in my life. I am focused. Ask my family, they will tell you that I am very energised. You can even see it now that I am very animated. So it doesn’t have any effect on me. I am approachable.

LRM: Thank you for your time Prof.