Zimbabweans should brace for three more years of harship due to austerity measures-Foreign Affairs minister Sibusiso Moyo

Austerity measures are designed to stabilise the economy, but workers warn of protests over the rising cost of living after a spate of price increases yesterday.
FOREIGN Affairs minister Sibusiso Moyo says Zimbabweans should brace for three more years of hardship as government implements austerity measures to stabilise the economy, but workers warned of protests over the rising cost of living after a spate of price increases yesterday.
The Zimbabwe Energy Regulatory Authority (Zera) yesterday raised fuel prices – for the second time in a week – by 23% for diesel from $5,84 announced last week to $7,19 and 22,4% for petrol to $7,47 from $6,10.
Since the start of the year, fuel prices have cumulatively risen by 456% as its newly reconstituted Zimbabwe dollar continues to lose value.
The announcement was swiftly followed by the Zimbabwe Retailers Association indicating that prices of goods and services would shoot up by 10%, which will invariably drive up inflation and the cost of living.
Retailers also said they would also pass the cost of running business on generators – owing to rolling powercuts of up to 18 hours a day – to consumers.
Appearing before the Parliamentary Portfolio Committee on Foreign Affairs yesterday, Foreign Affairs and International Trade minister said things would get “tighter” because of the austerity measures.
“We need appropriate fiscal policies and so far government has done well and has squeezed money supply because there was too much government expenditure and it means that things are going to be tighter to a maximum of three years, and by then we should have done all painful activities and then go to a stage when things are going to normalise,” he said.
Moyo said there were exporters holding on to foreign currency in their nosto accounts, with government trying to encourage them to release it onto the interbank market as foreign currency shortages persist.
“We are now getting a lot of trade on the interbank market and we encourage exporters who have about $1 billion in their nostro accounts that they should at least release part of this money so that it goes into the interbank and serve other people with foreign currency,” he said.
Confederation of Retailers Association president Denford Mutashu warned that consumers should expect a 10% increase in prices.
“The increase in fuel prices will push business to pass on the additional costs to the consumers by adjusting prices upwards by same margin averages, fuel used to add the cost of commodities by an average of 4% to 10% in the retail sector before the sapping load-shedding which has forced players to run solely on generators adding another huge cost,” Mutashu said.
The price hike has emboldened workers’ push for industrial action, with the Zimbabwe Congress of Trade Unions (ZCTU), saying it is time for a head on confrontation.
ZCTU president Peter Mutasa said confrontation with President Emmerson Mnangagwa’s government was now the only option available.
“The latest move will break the camel’s back. Everything is going up except the value of the workers’ earnings which in real terms are going down. The price of fuel means life has just gotten worse for the worker and if government does not have a solution to our problems it’s time we force them to come up with the solution,” Mutasa said.
Mutasa said owing to the shortage of electricity, which has subjected industry to long power cuts, most industries have turned to diesel-powered generators to keep running and are now on the verge of collapse.
“Demand has gone down because consumers cannot afford, so they have no market for their expensive goods, this is exposing hundreds of workers to the risk of losing jobs as companies face collapse,” Mutasa said.
Economist John Robertson, however, believes that salaries hikes are a must, but should be “reasonable”.
“With the exchange rate still at $8, 88 to the US$, fuel prices at less than $7,50 are not excessive. Prices in general are about three times what they were a year ago and wage demands that exceed that figure will prevent Zimbabwe from becoming competitive again,” he said.
“While productivity is much lower in Zimbabwe than in India and China, Zimbabwean workers should not be demanding wages that are much higher than they are in India and China. Investors in Zimbabwe do need to retool their factories and they might recover the needed confidence if wage demands are kept to affordable levels.”
Economist Persistence Gwanyanya said the country has been thrown into murky waters of debt owing to price distortions which have persisted over the years.
“There are lots of distortions in our economy, from utilities tariffs, fuel and pricing of a number of essentials, imagine fuel which, was landing at Msasa at US$0,72 was being sold at US$0,60 equivalent in Zimdollar. Electricity which cost about US$0,08/unit to import is being sold at US$0,02/unit. The same currently applies to pricing of water. At one point, the GMB (Grain Marketing Board) was buying maize at US$390/tonne and selling the same at US$240/tonne with a number of the so-called essentials accessing forex at highly subsidised exchange rate parity (1:1),” he said.
“Who do we think was subsidising all these? As they say cheap is expensive, it is now very clear to us that it is indeed expensive. Now all these issues have resulted in a legacy debt of US$1,2 billion in blocked funds (unremitted funds), which will be borne by the ordinary person. Currency instability in the country can be traced back to these economic distortions, especially on fuel, which consumes about 25% of the country forex,” Gwanyanya said.
“There is need to rationalise demand for fuel through the operation of the price mechanism. Like many normal economies, pricing of fuel should be market determined and in line with the interbank market. This is necessary to rationalise the demand for the product and improve its availability, thus dealing with black market for the same.”
In a statement, the country’s largest mobile network operator Econet said it was increasingly becoming uneconomic to run its network on diesel power.
“It is increasingly becoming untenable and uneconomical for Econet to guarantee a reasonable grade of service and optimal network uptime under the current conditions. With the ongoing aggressive Zesa load-shedding, our requirements are at more than six times the diesel we are currently using in order to provide uninterrupted service,” Econet said.