‘Zanu PF is a criminal organisation’- Prof Hanke on Zim economic crisis
Renowned global economist Steve Hanke has slammed President Emmerson Mnangagwa’s administration for failing to quash inflation in Zimbabwe and called the ruling party “a criminal organisation”.
In an interview with CNBC journalist Godfrey Mutizwa, Hanke accused the current government of being a replica of the late former President Robert Mugabe’s 37 years of unsuccessful leadership.
He further castigated Finance Minister Mthuli Ncube and Reserve Bank of Zimbabwe (RBZ) governor John Mangudya of being “incompetent” adding “they don’t know what they are doing”.
“This is the same kind of thing we have been getting ever since the time Mugabe was in power over 40 years ago,” said Hanke, a professor of applied economics at the Johns Hopkins University in Baltimore, Maryland.
“Now we have a new President but the same kind of regime. We have the Minister of Finance Ncube who has been there since 2018. It’s the same old story. We have the governor of the Central Bank who has been there since 2014, that’s the same old story.
“And we have Zanu-PF as a political party in power but you have to remember, Zanu-PF has more in common with a criminal organisation than a political party.”
He added: “We have a lot of inflation that is at the highest in the world right now, 426% (annual inflation rate). They have got currency problems as they have for many many years. You and I looked at the crises in 2008 when the prices were doubling every 24 hours.
“Ncube and the governor at the central bank clearly are incompetent. They don’t know what they are doing because they have tried all kinds of things.”
Hanke recommended that Mnangagwa’s administration dump the local currency and adopt dollarisation in order to resolve the current inflationary environment.
He urged the regime to consider a currency board if they want to keep the Zimbabwean dollar. He praised former Finance Minister Tendai Biti for the economic boom of 2009 and 2013, the years of coalition government.
“The only thing that will work is what they did in 2009. The official dollarisation, get rid of the Zimbabwean dollar completely. With the coalition government that was in power, they went into official dollarisation.
“Biti was the Finance Minister, he knew what he was doing and there was an economic boom. The official deficit was reduced and the inflation ran away. Then the coalition government collapsed in July of 2013 and then they de-dollarised and everything went bad and we have a hyperinflation. You remember in 2016 Zimbabwe hyperinflated again.
“There is one other option, that will be the currency board system. In a currency board system, they would issue the Zimbabwean dollar but it will be backed 100% by US$ reserves and operate at the fixed exchange rate with the US$. That system has never failed and it works. However, I think the cleaner way of doing it is to officially dollarise,” Hanke stated.
Local economist Tinashe Nyembesi also urged the government to change the banking and currency laws to allow institutionalisation of the currency board.
“If Zimbabwe can come up with a new constitutional court and parliament can become bicameral, why must RBZ remain the same?
“There is every reason to change RBZ. The law can be changed.
“Be sure to look out for my oped in the newspapers on why Zimbabwe must adopt a currency board,” he said.
This comes at a time when the country is facing a severe economic downturn with public sector workers demanding salaries in the US dollar. They have since indicated that they will turn to job action if the issue is not resolved in two weeks time.
Few weeks ago, the government announced a raft of measures to try and contain the skyrocketing inflation. They introduced the gold coins as a store value for those with large sums of money.
The country is set to hold harmonised elections in 2023 and the economy is expected to play a key role in influencing the results.