Gono does not have power to change things but he has the power to make them worse

The Reserve Bank Governor has finally realised, albeit belatedly, that he does not have real power to check Zimbabwe’s spiral downwards. He has failed to make positive impact on the people that he ultimately needs to influence before any economic turnaround policies he proposes can have a chance of succeeding.

However, I am not so sure that he realises that what he actually has, because of his position as the Governor of the Reserve Bank, is the power to worsen the situation. In fact, he has done that a few but very significant times in the past. Gideon Gono works hard to keep Zimbabwe’s economy from declining further. He really does try. But sometimes he tries too hard…and that is the problem.

In 2004, when he was first appointed Governor of the Reserve Bank of Zimbabwe, Gideon Gono strayed from his job of cushioning the economy and dabbled in quasi-fiscal policies. He printed money that he lent to industry and government at ridiculously low rates. He hoped that Industry would use this money to boost productivity. Naturally, things did not work out as he envisioned because we all know what happens when good money chases bad money and we all know what bad people do with easy money. Gideon Gono’s quasi-fiscal policies inadvertently fuelled inflation and speculation.

Gideon Gono did not stop there. He hoped that the country would start receiving balance of payments support once Zimbabwe cleared its arrears with the IMF. He therefore printed more Zimbabwe dollars that he used to purchase foreign currency to pay the IMF. It is said that some cabinet ministers were against making any payments to the IMF because they felt that it would still not change the IMF’s position on Zimbabwe. Personally, I am inclined to believe that there were right because Zimbabwe’s status in the IMF did not improve with the payments. I think Gideon Gono demonstrated a bit of naivety in not understanding that Zimbabwe’s beef with the international community is largely political and therefore can only be handled politically. Ultimately, history will judge whether he did the right thing or not by paying the arrears but his policy did not produce the desired result. It only managed to fuel inflation

In his latest monetary policy statement, Gideon Gono announced that the Reserve Bank would now stop all quasi-fiscal policies and concentrate on monetary issue. However, in the same policy statement he proposed the establishment of a social contract that he says is required to lay a solid foundation for sustainable economic recovery. Because he does not have the power to make things happen at the pace that he wants them to, this is where he should have stopped. Unfortunately he went on to propose a timetable for the implementation of the social contract. One of the requirements of the social contract is a price freeze across the board for a period of three months or so. Naturally, business responded typically to his pronouncements. Zimbabwe has over the past few weeks witnessed unprecedented price hikes. The rate at which prices are going up now has been higher than that witnessed late last year. Economists have described the spiral as an attempt by industry to attain high price levels before a price freeze is effected but the result has been a tighter squeeze on the consumer while inflationary pressures continue to mount.

We all know that no positive change is going to come out of Zimbabwe, no matter how good the suggestions are until Robert Mugabe, Solomon Mujuru and Emerson Mnangagwa and their various followers reach some kind of agreement for a truce. For now, Gideon Gono’s latest utterances have once again only served to fuel inflation.