Reserve Bank governor delivers sermon on reform

Zimbabwe's Reserve Bank governor Gideon Gono used his quarterly monetary policy statement to rebuke parallel market traders in fuel and other essential goods, but delivered little by way of concrete steps to reverse the country's ongoing economic meltdown, says an economist. A recurring theme in Gono's statement was the need to curtail corruption in both the public and private sectors. "If, as a nation, we do not resolutely stamp out growing corruption, especially among us people in positions of authority and influence ... we will soon discover, too late, that policy formulations, implementation, monitoring and decisions have been based on self-interest, racial overtones, regional and tribal considerations, at the expense of national good," Gono warned. "Economic opportunism is now at the heart of everything we seem to be doing day in, day out, and this cancer needs to be stopped as we open a new chapter in a new year full of new prospects," he noted. Economist Dennis Nikisi said it was pointless to rail against corruption without addressing the environment in which corrupt practices flourished. "Without a consistent and cogent policy in regard to securing foreign currency we are shooting in the dark. We were joking this morning that the Reserve Bank governor should now [become] a preacher - the [monetary policy] statement was not economic policy but merely addressed issues that have to do with morality," he said. The government's attempts to control the exchange rate, and the resultant critical fuel and foreign currency shortages, created opportunities for people to "engage in arbitrage". "For example, a new farmer will take a whole [growing] season to earn money, but he can buy fuel [at a subsidised rate] and sell it on at a profit almost immediately," Nikisi pointed out. Gono admitted that Zimbabwe was the only country in the world experiencing hyperinflation, and said curtailing money supply growth, applying a tight interest rate policy and reinforcing the interbank foreign exchange market were priorities. Nikisi predicted that inflation would continue to climb, as the cost of money was rising due to the increased printing of currency to support fuel imports and the ailing agricultural sector. "This translates into higher costs of production and companies will have to increase the prices of goods." It was difficult to imagine inflation staying below 600 percent this year, he concluded.