1/6 Who made the RBZ a GOD to decide who gets what, when, & at a fixed price? Is this the system Zimbabweans want? Price controls and rations?
Firms no longer need to be innovative. They just need to borrow ZWL & apply for FX.
Fx is scarce. Is this the best way to spend it?
2/6 Did anyone see the connection between the recipients of Fx & consumer basket? This is how inflation rate is rigged.
Gono tried this system. Inflation went down from 635% to 130%. But the pent up bubble burst & inflation skyrocketed beyond the 635%.
3/6 What if Gono had maintained the market allocating Fx & not played God?
Almost all the beneficiaries of the current Auction system are consumption based. This is the height of misallocation of resources.
4/6 Instead of using FX for capital investment & increasing the country’s production capacity. The most scarce resource is used to make “cheese”.
Imagine if miner retained all FX during this commodity boom? Their first call, would be to double capacity. That’s what miners do
5/6 ...during a commodity boom. By increasing capacity they reduce the cost of extraction. Capital investment leads to
(i) Production (GDP) increase
(ii) Creation of good quality jobs
When was the last time a gold miner in Zim invested US$250m on a capital project? Never!
6/6 Yet in the rest of Africa & other developing nations US$1bn investments are happening in Gold mining
In Zim, miners are subsidizing consumer consumption instead of capital investment.
At some point we must accept we don’t have thinkers in this country.
End
NB**
“The parallel market premium which had narrowed markedly in the first quarter of 2004, widen sharply from 45% in Jan 2005 to about 100% by early July 2005.” IMF report.
Since the Fx Auction of June 2020 the parallel market premium is already above 45%.
Was Gono better?
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1/10
It is absolutely necessary as citizens we never tire of highlighting the policy flaws. We made the emphatic point many times, that ZWL is being created to buy US at the fixed auction.
Belatedly, RBZ seems to have taken notice of this. The apparent speculation & arbitrage.
2/10
Money supply of ZWL has been increasing at 315% by Nov 2020. Most of this ZWL finds its way to the fixed Auction rate. Giving importers a 40% discount.
ZWL “productive loans” are less than 40% p.a when inflation is at 322%.
This creates the perfect arbitrage.
3/10
The arbitrage is not only with importers. The speculation goes further in the market. Eg a firm/individual can buy steel/gas/ non perishables priced at 83 & simply hold the stock. When shortages arise, or when the inevitable devaluation occurs they’ll offload at a profit.
There is a fundamental difference between a stimulus package & government guarantee.
Perhaps let’s start with Biden’s $1.9trillion package. Perhaps far from Zim, cooler heads can prevail. Whence it becomes obvious what GOZ has done.
The $1.9tn Biden stimulus works this way; (1) Treasury spends more than its revenue through issuance of a bond. This over expenditure is why it must go through both houses of the legislature.
This means treasury is running a deficit.
(2)Treasury issues the bonds in the marketplace, but investors are weary of future high inflation & thus hesitant to subscribe. Besides there is not enough money in the world to allocate to new issuances.
So the FED literally prints money to buy the Bonds. Treasury owes the FED
The President Mnangagwa, has announced GOZ new policy to repossess unused land, big farms, multiple owned farms & state land. This land will be redistributed to the youth.
The new policy is Political & NOT economics. See the attached thread.
2/ With a restive, unemployed, unskilled youth, albeit the largest voting block, Zanu PF has decided to placate the youth with Land.
As a political party, this is well within its rights. But this is dangerous for the Economy & will destroy what little activity is in Agriculture
3/ Agriculture in Zim requires security of tenure. It requires title deeds & private property status.
Private property is not necessarily needed for banking finance. But for innovation to take place. Land is just a factor of production no one has the right to dictate its usage
On the 12th of Feb 2021, compelled by a court order, the MOF gazetted loans taken by RBZ it guaranteed.
It is very clear why RBZ & GOZ were secretive about these loans to the point of making its apologists deny the very existence of them.
2/ For example, over the last 3yrs it has been pointed out that;
(a) RBZ is involved in quasi fiscal activities
(b) GOZ treasury has no surplus
These two points are linked. RBZ comes directly under the Minister’s armpit. RBZ took over treasury responsibilities & its deficits.
3/
RBZ losses, are directly treasury’s losses & by law must be included in the consolidated revenues & expenditures. This never happened, so the right hand claimed it was clean, when all the time the stolen goods were in the left hand.
1/
Not many countries in the world have a budget surplus. Not even fake surpluses. Well run countries found themselves in manageable deficits - without need to print. Borrowing directly from the market place.
Luxembourg is such an example- in normal years it runs a surplus.
2/ Mthuli made a mistake touting a surplus when it really wasn’t necessary to propagandize. The economy was already in a depression with the 2nd highest inflation in the world. GOZ domestic debt was being inflated away. Offering pensioners 8% interest when inflation was over 500%
3/ Perhaps his colleagues didn’t understand. They were happy to be told GOZ domestic debt was falling fast. Remember this was at a time the official ZWL inflation was banned.
The false euphoria resulted in 2 mistakes;
(I) Pension industry crushed to only $1bn.
I am of the strong view that the private sector should lead the vaccination program.
The insurance & pension industry must lead the private sector initiative. The NGO’s & aid agencies must support the private sector initiative- for free inoculation of the most vulnerable.
2/
Relying on a clueless GOZ will not solve the problem. But will perpetuate the endless lockdowns. Zim is already a laggard in the purchase of a vaccine. Israel made the order in April 2020. As of now, no order has been made by GOZ. Zero proof has been given
3/ Zimbabweans don’t realize how bankrupt the state is. And if the state was honest then the public would have been more sympathetic to Mthuli. Mthuli sees an opportunity to further fund raise. AIDS, rural electrification, Zinara levies go to central treasury & not intended uses