- IMF says reform agenda off the rail
- Analysts say local currency was introduced without right fundamentals in place
- 2.5% tax on civil servants not sustainable
FINANCE minister Mthuli Ncube’s economic reforms are under scrutiny following reports by the International Monetary Fund (IMF) that the reform agenda is now off the rail.
In its report on Wednesday IMF said: “Zimbabwe is facing a humanitarian and economic crisis and consequently the country’s economic reform agenda is now off track.”
The report comes at a time when Ncube was announcing another cocktail of policies which include the introduction of garrison shops to carter for the military service personnel as well as additional taxes for civil servants to finance the savings fund.
Ncube introduced the local currency, which the IMF says has been devalued due to lack of confidence by the market.
At the material time, Ncube said all financial fundamentals were now in place for Zimbabwe to have its own currency.
However, in its statement IMF says: “Delays and missteps in the implementation of monetary and financial reforms have failed to restore confidence in the currency.”
Economic analyst Victor Bhoroma said the de-dollarisation was a mistake as the country was not economically stable to make such a move.
“At the time of the introduction the country was gappling with declining production with industry capacity of below 35%, high sovereign risk debt of 8,5%” he said.
Despite introducing the local currency, confusion and policy inconsistency have been the order of the day as some institutions, especially in the fuel sector, have been allowed to trade in the US dollars.
The removal of the multi-currency system gave rise to a three tier price system whereby shop owners have different prices for goods in United States Dollars, RTGS and ZWL which has resulted in the fluctuation of prices of services around the country.
IMF stated that such policy inconsistency have eroded the trust in the local currency rendering it useless.
According to the IMF statement, policy inconsistency, vested interest and drought have affected Zimbabwe’s economic reform.
Ncube’s policies have also shown vested interests in government priorities such as his introduction of the garrison shops to subsidise men and women in uniform.
Bhoroma said the government is looking for a way to satisfy other workers on the expensive of others.
“The policy appears to be another political idea to address demands from the uniformed forces who are feeling the impact of income erosion like every civil servant.
“So the government is robbing Peter to pay John and that will result in civil service unrest and resentment. All civil servants are a priority and require competitive remuneration,” he said.
Bhoroma also said the establishment of Garrison Shops therefore address one need among many. All civil servants require a competitive salary in the region of what they used to receive from 2009-2015.