USE INTELLECTUALS TO SOLVE ECONOMIC PROBLEMS:

IN RECENT days we have seen chaotic scenes defined by shortages of basics commodities such as fuel and food stuffs. These shortages has caused panic buying. Government authorities including the central bank have assured the general public that sanity will prevail soon. All things equal, the central bank’s $600 million nostro stabilisation facility from Afreximbank will certainly quell out this problem for the next few months. There is no doubt about this.

However, this measure is not enough to take us to Canaan.

Our central problem as a country is low production. We do not have a currency problem. All the manifestations we see in the market, which exhibit a country currency problem are induced by productivity challenges.

As a result of low production, we have seen the country’s trade deficits ballooning to a cumulative figure of $30 billion since dollarisation. Government’s fiscal space has continued to dwindle while at the same time the budgetary requirements have largely remained the same. This situation has resulted in Government running into budget deficits, which were largely funded by treasury bills. As a result of these deficits, Zimbabwe has seen itself realising negative savings rates of 11 percent which means that the country is dissaving. Our basic economic principles tells us that savings are identical to investment. And, from basic economic growth models, investments are a key requirement for production enhancement.

In my view, the continuous increase in the trade deficit and budget deficit, which emanated from low production are the twin evils which have taken us to this point. My understanding of basic economics tells me that in a dollarised environment, the central bank has limited capacity to influence the economy.

The key policies, which are better posi- tioned to direct the economy in a particular trajectory are trade policy, industrial policy and fiscal policy (which is the budget). Ironically, there seem to be a greater feeling that the Reserve Bank of Zimbabwe has the right tool box for this economy, which is incorrect.

The question we have to grapple with is how do we use the three policies indicated above to solve our economic challenges. This article does not intend to provide solutions to the challenges of low production, but rather, calls us to use our intellectuals to solve our economic problems as Zimbabweans.

For starters, what we need is to come up with a proper diagnosis of our problems. In this, we need an “x-ray like” diagnosis for the economy. We need to carry out a number of specimen tests for the whole economy. After having done this, we need to separate symptoms and root causes. This should then be followed by “medical prescription” targeted for the specific “disease” besetting the domestic economy. One ‘disease’ may require three drugs.

To make it simple, at a household level, if a family member falls sick he/she will seek medical attention. He/she will follow the same process of getting x-ray and a number of tests done. This will then inform the basis on which the doctor will specify medical prescription. This is where they will tell you the drug that gives you appetite, kills pain and cures your disease, but you must be taken when you about to sleep because it causes dizziness.

Interestingly, if you go to the hospital and the doctors are not clear about what caused the sickness, they will not prescribe medication no matter how sick one is. They always work hard on diagnosing the disease and if they finally detect the problem and realise that it is a serious one, which is beyond their control, they will give the patience a referral letter to seek medication elsewhere, that is, from other hospitals locally or abroad.

This analogy about the patient seeking medical attention and the processes carried out by the medical doctors is clearly the same process, which must be undertaken by policy makers.

Coming back to our case, we have not gone to a point where we undertake a proper diagnosis of the economy and come up with consensus on the root causes of our economic problems as well as separating them from symptoms. In the same vein, we have not clearly articulated the right Government ministry or department, which must be responsible for specific task and how its throughput contributes to the global goal. This is what we have done:

We have introduced bond notes and had disagreed over their relevance in addressing our economic problems. Now after almost a year, we have seen that there is no question on question on whether the bond notes have succeeded or failed in stopping externalisation, improving liquidity and promoting exports.

The bond notes have failed dismally. Some of us were very clear from the onset that the bond notes will lose value and will overall fail to address the current economic challenges. This earned us names such as prophets of doom, but the reality is that we were right after all.

The Minister of Finance last year moved a motion twice to scrap civil servants bonuses and hit a brick wall. His argument was that treasury did not have capacity to pay bonus. He was right. He did not support from his colleagues in Cabinet even after the budget had gone through Cabinet and presented it in Parliament we saw his proposal being reversed.

The truth is that Government went on to have a budget overrun of $906 million by end of 2016, which was financed through Treasury Bills and the domestic debt has shot to a staggering figure of $4,4 billion. It is a given that if the Minister of Finance moves again the motion to scrap bonuses he will not succeed notwithstanding the challenges this is causing. ◆ Dr Mugano is an author and expert in trade, investments and development. He is a Research Associate at Nelson Mandela Metropolitan University and a Senior Lecturer at the Zimbabwe Ezekiel Guti University. Feedback: Email: gmugano@gmail. com, Cell: +263 772 541 209.