A week ago, on Friday the 24th of April, the Monetary Policy made some tweaks to Zimbabwe’s monetary policy. These tweaks are meant to prode banks to lend money to the ailing economy and hopefully minimise the impact of the current Covid-19 pandemic that has wreaked havoc throughout the world.
According to Finance Minister Mthuli Ncube Zimbabwe’s economy is expected to shrink by as much as 20% this year. Unsurprisingly he blames the projected expansion on climate shocks which he says impacted on Zimbabwe’s agricultural backbone as well as decimated electricity generation. Surprisingly he also acknowledges the country made some policy missteps.
These tweaks are just the latest Hail Mary
It is no secret that Zimbabwean’s banks haven’t been exactly doling out the loan dough. After dishing out a bunch of non-performing loans at the start of the USD era they got their fingers burnt and since then they have locked their money purses and thrown out the keys, opting instead to subsist on service charges such as monthly fees on accounts.
While these tweaks are academically sound this will probably go down as another case of too little too late. The impact on banks’ willingness to lend is likely to be minimal in any case while these policies would be on point in other economies in Zimbabwe they are not likely to solve some of the most fundamental problems facing the economy.
In fact this will not even solve the capital needs of most of Zimbabwe’s businesses that are mostly informal. This is a fact the government continues to ignore whenever crafting and announcing their policies. Zimbabwe’s economy is mostly informal! Thus far the government has done very little for the informal sector in terms of policy, choosing to focus on the large few businesses that remain.
These latest policy announcements are just the government’s latest Hail Mary and are not going to help the informal sector much. By extension this means they are not going to help the Zimbabwean economy much.
In fact as the lockdown takes its toll the government has taken quite the antagonistic approach as city councils across the country have been razing stalls which the government deems “illegal”. More would be achieved by working with vendors and the informal sector to ratify and formalise some of its activities than setting it back in such acts of misguided zealetory.
In fact such crackdowns not only result in increased unemployment, they destroy critical value chains upon which the more savvy formal sector has come to depend on. Most large businesses depend on the informal sector for critical supplies and even use the informal sector when it comes to selling and marketing their products.
It seems the government remains blind to these facts and the latest measures is the latest shovel of evidence being dumped upon a mountain of ignorant policies.