Professor Mlambo, a holder of Ph.D. in Development Economics, is an authoritative figure on the ins and outs of Zimbabwe’s economy and politics.
Cashtalk: How is the Covid-19 pandemic affecting the life of an average Zimbabwean economically?
Professor Mlambo: An average Zimbabwean is affected by Covid-19 in many ways.
Economically, mainly due to lost income. The source of income for many families was vending or the informal sector. Therefore, the lockdown has completely closed their source of income.
It is also important to note that the majority of Zimbabweans’ savings were wiped out in 2008 and recently in 2019 through the 1:1 conversion of currency from USD to Bond Notes /RTGS. This makes it worse for many Zimbabweans compared to other African countries with relatively stable currencies. In other countries, some families are using own savings as a cushion against losses of income due to Covid-19.
In Zimbabwe even the few with stable jobs are being affected by the lockdown. Many companies are struggling to pay salaries during the lockdown period. The easing of lockdown might help, but some industries such as tourism will take time to recover due to a global shutdown.
Lastly, the fact that Zimbabwe has a pre-existing economic crisis makes it difficult for a majority of Zimbabweans to cope. It would even more difficult to recover from this lockdown.
The impact of Covid-19 also extends to, most importantly, access to health services. Though we are seeing refurbishment of clinics, hospitals and building of temporary structures, to make the country ready for Covid-19, we are potentially neglecting primary health care. This could be the reason for the increase in malaria deaths and other diseases.
In a country like Zimbabwe, with shortages of fuel, cash, water, medicine, food, data (internet), etc, life is generally unbelievable. Covid-19 has just worsened the situation.
Cashtalk: The government is giving vulnerable families $200 per month for 3 months. Is it enough? What can the government do given the resources at its disposal to help the vulnerable families?
Professor Mlambo: The cash transfer to vulnerable families is a welcome initiative and is fairly in line what other countries have done. However, given an inflation rate of 500% and an exchanger rate of more than ZWL$40, ZWL 200 for a family is very low. However, this amount has to be understood in the context of limited fiscal space for the government.
My only hope is that government has accurately identified the vulnerable families and the disbursements have started. One hopes that this noble idea won’t be a victim of incompetence, nepotism and corruption.
Cashtalk: The RBZ recently reduced its bank rate policy in the hope that banks will lower interest rates to encourage people to borrow. Did the RBZ do enough to soften the blow Covid-19 pandemic has had on people’s finances? What can the RBZ do instead?
Professor Mlambo: Forgive me, but I don’t see the role of RBZ in the current framework of governance in Zimbabwe. Monetary policy tools are only effective if there is independence of institutions, clear separation between fiscal and monetary policy, and a currency that is generally accepted as the legal tender among others.
Right now, RBZ is treated as an appendage of Ministry of Finance and its RTGS/Bond Note currency is being rejected by economic agents. Therefore, it’s monetary policy tools are rendered useless.
It’s also important to note that banks’ decisions to lend is not a factor of interest rates only. Other important factors include lack of loanable funds, lack of confidence, policy uncertainty (the use of statutory instruments at every turn makes the market players, including banks and investors jittery), unstable currency, lack of investments in Zimbabwe among many others.
On the question of what should be done, I want to emphasize that the problem is bigger than RBZ. As recently confirmed by Prof Mthuli Ncube, the problem is bigger than the Ministry of Finance as well. The economic challenges are just a manifestation of wrong and toxic politics.
There are only two things which can save the economy: A deal with Nelson Chamisa and the MDC or a rescue package from a rich country. Both seem to be remote possibilities.
You can catch some of Professor Mlambo’s commentary on his twitter handle @MlamboProf.