Chinamasa's propaganda can't resuscitate economy

HARARE - Back in the days when the Soviet Union was still a communist empire, its flagship broadsheet newspaper was called Pravda, or “Truth”.

But all and sundry knew it was a supplier of lies.

The credibility of Pravda was so small that those who bothered to peruse it would believe unerringly the opposite of what it tried to report.

Zimbabwe is supposed to have learned many lessons from the collapse of the Soviet Union.

But it seems Zimbabwe’s Finance minister Patrick Chinamasa has learned nothing about the futility of lying about economic performance. 

In a presentation to military officers attending Joint Command and Staff Course Number 30 at Zimbabwe Staff College on Thursday, he claimed “the country’s economic situation is gradually improving due to pragmatic policies that the government has been implementing”.

He actually bumped up his economic forecast for 2017 by two full percentage points to 3,7 percent from 1,7 percent and said the economy will grow faster than expected by economists.

Judging from the content of his rosy speech, it is clear Chinamasa is not reporting honestly on the state of the economy and actually invented a more optimistic message.

At one level, Chinamasa’s desire to counter the pessimism about Zimbabwe’s dying economy is understandable. In the last two months, the economic news coming out of the crisis-torn country was both depressing and worrying: a spectacular stock market crash, a sudden devaluation of bond notes, and anaemic economic activities, suggesting the economy will miss the official target annual growth for 2017.

But does Chinamasa actually hope to restore investor confidence by hyping Zimbabwe’s bright economic future?

The answer is almost definitely not.

The cash-squeezed government — facing a critical funding shortfall to bankroll its commitments, including its bloated civil service wage bill, government workers’ pension contributions and medical insurance — is turning to treasury bills (TBs).

This also comes as the new bond notes — ushered in to help address the epic cash problems — are losing value dramatically, facing rejection and US dollars have vanished from the open market.

With imports massively outstripping exports, businesses are mostly selling their merchandise in bond notes, making it impossible to finance imports using the surrogate currency, with an informal forex market now discounting the bond note and the Real Time Gross Settlement (RTGS) “dollar”.

A key test will come when Zimbabwe reaches the $200 million bond notes threshold backed by a facility provided by Cairo-based Afreximbank.

Yet Chinamasa rejected that the country faced liquidity challenges, telling the Staff College that “the banking sector has remained fairly stable with capital levels ranging between $40 million and $246,6 million against a minimum of $25 million.”

At a time banks are plagued by long queues and have drastically slashed daily cash withdrawals from $1 000 a day to as little as $50, Chinamasa claimed:  “Long queues outside the banks are being experienced particularly during month-ends. Government is promoting the use of electronic payments (plastic money) in order to reduce pressure on the demand for physical cash.” 

This also comes after government buckled under pressure from restive civil servants and accepted on Monday to add an unbudgeted $180 million on its $4bn 2017 budget in order to pay its 300 000 workers’ their long overdue 2016 bonuses — heightening fears the financially struggling government could fund the 13th cheque using TBs.

The commercial paper is now among the biggest vehicle for State fundraising and clearing its ballooning $10bn debt.

This comes as government this week paid the scandal-plagued State-run pension fund, National Social Security Authority (Nssa), $181 million worth of TBs, to clear three-year arrears after failing to remit its contributions to the fund as an employer.

What Chinamasa seems not to understand is that current pessimism about the economy has less to do with the recent spate of bad news than with the policy inconsistency, lack of reliable data on the economy and the opacity of Harare’s process of economic policy-making and its intentions.

Although it is doubtful whether government propagandists know it, the most precious commodity in the marketplace is credibility. Sadly, what government has done in recent months is to engage in acts that systematically undermine its own credibility.

Exhibit A is Chinamasa’s Pravda-like version of economic growth data. Another example is attempts at portraying the devaluation of the bond note as a lie. Chinamasa’s counterpart, RBZ governor John Mangudya defended the fiat currency last weekend, asking me: “Have you seen twin pricing in OK (supermarket) or major outlets? Go to the formal market, there is no weakening of value.”

This is an example of an ill-advised attempt to prop up a crashing currency. These actions have seriously undermined the credibility of the government and shaken the confidence of investors and business executives.

Comments (2)

Mr Bond Mangudya may you go to electrosales Avondale and see if there is no twin prices. The prices on the shelves are for bond notes, but when you pay using US dollar all prices are 20% less than those displayed on the shelves. Wake up boy don't sleep on duty

Facts - 11 March 2017

So many businesses men and women and their families are leaving zimbabwe.They know whats coming,by july we'll be in serious trouble economically.

Young Zimbo - 13 March 2017

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