Implications of the new economic measures announced by the Minister of Finance and Economic Development on reducing poverty and inequality

28 June 2022

The Fight Inequality Alliance Zimbabwe takes note of the new measures announced by the Minister of Finance and Economic Development to stabilise the exchange rate and promote the availability of basic commodities and conditions of service for civil servants. The measures are announced at a time when approximately 6.4 million Zimbabweans are living in extreme poverty with the majority struggling to put food on the table. It remains the Alliance’s view that any intervention meant to address the current socio-economic crisis in Zimbabwe must be measured against the extent to which it advances the agenda of reducing poverty and bridging the widening gap between rich and poor Zimbabweans. The pronouncement of measures to guarantee access to basic commodities like mealie meal and bread at reasonable prices is commendable. However, the following are the Alliance’s views concerning other measures;

Entrenching multicurrency and exchange rate systems in law

  • The entrenchment of the multicurrency and exchange rate systems in law is just a move to reaffirm the government’s position and not a long-lasting panacea to address the lack of public confidence in the two systems. Boosting public confidence in the multi-currency system cannot be solely achieved through the entrenchment of systems in law but through addressing the root causes of inflation such as the lack of fiscal discipline and excessive quasi-fiscal operations by the Reserve Bank of Zimbabwe. The government should also guarantee policy consistency and predictability to restore public trust. Given the ongoing reminiscences of 2008 where the local currency is massively losing its value and inflation rising in double-digits per month, it is an undeniable fact that the USD will remain a currency of choice, especially for value preservation by the business community; hence more still needs to be done to instil confidence in the local currency.
  • On another note, history tells us that there has always been the selective application of monetary-related law in Zimbabwe with big and politically connected businesses who would have breached these being immune to law enforcement. This promotes wanton behaviour by some sections of the business community. Furthermore, it undermines public trust and the government must therefore ensure that there are no “sacred cows” when it comes to imposing penalties for those entities who would have infringed and manipulated the stipulated pricing system to guarantee access to commodities and services to both high, average and low-income earners.
  • The willing buyer, willing seller principle is likely to be ineffective because of the lack of public confidence in the banking sector. With the current huge disparity between the interbank and parallel market rate, it is most likely that those privileged with access to USD would risk accessing ZWL at the parallel market with spiking rates than going for lower rates at the bank. This has the potential to increase inflation, a situation that is prejudicial to the majority who are earning in ZWL and below the poverty datum line. 

Conditions of service for civil servants

  • It is factual that civil servants are part of the working poor citizens. In as far as the 100% increment of salaries to civil servants is acknowledged, this is likely not to spur any meaningful results to the beneficiaries but offer a temporary relief given the high inflationary environment. As of 27 June 2022, the official rate was US$1:362.6 against the parallel rate of around US$1: ZWL630. In the same month, inflation was recorded at 191%, way above the salary hike awarded by fiscal authorities. Therefore, a salary increase that lags behind ever increasing prices cannot surely address the widening income inequalities and it means that public workers will remain worse off unless the government starts to give salaries pegged in US dollars to track exchange rate depreciation which is driving price growth. Also, salary increment without addressing the root causes of inflation is dealing with symptoms and not the root problem. Furthermore, some of the measures to motivate civil servants like housing loan facilities, have been on the cards for quite some time while some incentives like duty-free motor vehicle import for civil servants are not practical given the real value of their current salaries. As such, such elusive schemes may end up being abused by the top brass in government without gain to those on a low salary scale. The government must therefore prove beyond any reasonable doubt its commitment to transform these into lived realities and not just political statements.
  • The government offered to pay school fees for up to three biological kids for teachers with the current limit of ZW$20 000 per child. Given the high inflationary environment, the government must make this facility flexible and subject to review to match changing currency landscapes. Also, the incentive should be alive to the fact that not all civil servants have children going to school while some are breadwinners taking care of kids from their extended families. As such, it must be extended to non-biological children otherwise the incentive will bring no relief to some sect of public workers.


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