Editorial comment: Government policies must stimulate economic growth
âTIS a lesson you should heed, try, try again. If at first you don’t succeed, try, try again.
It’s part of a famous poem that many people grew up reciting. It was written by 19th century British author and philanthropist William Edward Hickson to encourage perseverance in the face of adversity.
The importance of this poem was highlighted by Statutory Instrument (SI) 127 of 2021 which almost confirms the government’s habit of groping in the dark, imposing one bad policy after another without taking the time to find out why its policies fail to revive the economy and pave the way for a better life for citizens.
To recap, the government legislated 2021 SI 127 last week with the aim of improving the Zimbabwe dollar and preventing companies from using the parallel market rate of $ 1 for $ 130, or nearly $ 53. % higher than the official rate. This will be encouraged by punitive civil penalties that can lead to prison terms if not observed.
Affected companies are those that quote Zimdollar prices for goods and services, offer discounts for foreign currency transactions, charge Zimdollar prices indexed to the parallel market rate, receive foreign currency but receive in Zimdollar and abuse foreign currency foreign auction system.
While it is good that the government wants to support the Zimdollar, simple economics dictate that acceptance of local currency should be driven by market forces, not government intervention.
As such, since the legislation was introduced, prices have increased because if businesses are to charge for goods or services using the official rate of $ 1: $ 85 over the more lucrative parallel rate, it makes sense. to increase prices. After all, businesses are there for profit, not charity. In addition, if the official rate is pushed down the throats of companies, companies that pay workers indexed to the parallel exchange rate now have the right to reduce wages by setting wages to the official exchange rate.
Finally, if a business refuses to sell goods or services in Zimdollars, customers can report that business, resulting in penalties and possibly jail time for its directors.
And this will particularly hurt the real estate sector, where the Zimdollar is mostly shunned.
Instead of presenting the legislation, the government could have tried to understand why companies offered discounts for foreign currency transactions or fixed prices on the parallel market rate.
By understanding only these two scenarios, the government would then be able to effectively introduce legislation that supports economic growth. Just recently, retailers called for “pro-poor policies” in the next round of Treasury economic measures, with companies citing declining incomes caused by weak consumer spending.
The âpeople’sâ government should increase the income tax exemption threshold while increasing the minimum wage to cover the cost of living which covers tuition and housing for families.
It should also stop raising the price of fuel when it is generally cheaper, the highest on record in the last decade. In addition, the government should reduce utility tariffs, deliver programs that help vulnerable people become more economically self-sufficient, increase spending on infrastructure to create jobs, and invest in entrepreneurship programs.
The government can encourage companies to hire more people by awarding more contracts to companies that reach a certain staff quota. The government must also introduce more taxes on top incomes and ensure that the tuition fees of state higher education institutions are within the reach of vulnerable students.
He should abandon the Zimdollar until it is sufficiently supported and introduce a cheaper and more stable currency like the South African rand, which our neighbors have said is possible even without being a member of the common currency area, which connects South Africa, Namibia, Lesotho and Eswatini in a monetary union.
This would control inflation and restore the purchasing power of consumers.
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