Delta raises red flag over economic policies

DELTA Corporation (Delta) last week said government should take steps to reverse expansionary monetary and fiscal policies, which have caused economic instability.
The country has over the past few years suffered a monetary crisis headlined by currency problems and inflationary pressures.
According to Treasury, this has been caused by the disparity between money supply and cash deposits as government has relied on domestic credit to finance an increasing budget deficit.
Experts say financing of the deficit under dollarisation should ideally be from balance of payment support to mitigate money creation, which is not matched by foreign currency availability.
“The expansionary monetary and fiscal policies have brought the economy to a disequilibrium. Government should take steps to sterilise the excess liquidity without compromising national savings and market confidence,” Canaan Dube, Delta’s board chairman, said in a commentary accompanying the company’s financial statements for the six months ended September 30, 2018.
“It is not enough for government to acknowledge the fact, and pronounce policy changes but to show commitment and take steps to correct the situation. The country needs to live within its means and to implement business friendly policies to deliver the Zimbabwe we all want,” he said.
In what appears to be recognition of the seriousness of the matter, treasury has proposed a raft of measures to address the situation, including fiscal anchors, budget balance as well as limiting government borrowing from the central bank.
The controversial two percent transaction tax on electronic transfers is also meant to help correct the fiscal imbalance.
On the monetary policy side, in October, the central bank directed all banks to effectively operationalise the ring-fencing policy on nostro foreign currency accounts it introduced in February, by separating foreign currency accounts (FCAs) into two categories, namely Nostro FCAs and RTGS FCAs.
Business and the economy at large has, however, been rattled by these changes.
“The fiscal and monetary policy pronouncements have been dampened by contradictory statements on the multi-currency framework.
“In addition the two percent transaction tax took both business and consumers by surprise, raising policy risks and undermining market confidence,” said Dube.
“Government and regulators are urged to engage stakeholders ahead of major policy pronouncements in order to maintain market confidence,” he added.
Despite the challenging environment, Delta recorded exceptional performance during the six month period with a 37 percent increase in revenue driving profit after tax to a 77 percent increase, from $32 million in 2017 to $57 million for the period under review.
Operating income increased by 73 percent over prior year, driven by a 54 percent increase in lager beer volumes and a buoyant Chibuku Super contribution in the Sorghum beer category.
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