Omega Ukama 
UNECONOMIC business parameters in Zimbabwe such as sub-optimal pricing, which lead to government subsidies, are killing the economy, a top economist has said.
Reserve Bank of Zimbabwe governor John Mangudya
This comes as government has run huge budget deficits in the recent past due to subsidies for basic commodities such as energy and grain.
And this, experts say has landed the economy in its current state of high inflation. The country’s official inflation was reported at 176 percent in June this year, up from 2,91 percent in June last year.
“The losses that ZESA Holdings (ZESA) will incur are for the state and eventually they will need to be monetised from the consolidated revenue fund. So while we have a surplus today the losses being made by ZESA will eventually need to be catered for,” Brains Muchemwa, a local economist, said at a business conference.
“Now our history tells us that our government prints money when it wants to subsidise, so even though we have been seeing signs of this changing, surely if the losses are huge, there will not be another way that government will be able to do it.
“This is the problem we have had for many years as a country. The reason why we have been struggling with money supply is because there are many such subsidies that government has to pump into the economy,” he said.
ZESA, which has tried to raise power tariffs for years without success, insists that its tariffs are sub-economical.
“We have a substandard tariff and we are expected to run business on such a tariff. Right now our tariff is 1,2 US cents per kWh, the cheapest in Africa and in the world,” Patrick Chivaura ZESA’s acting chief executive said recently.
Meanwhile, the utility company has been forced to effect heavy load-shedding after being cut-off from a special arrangement it had with the central bank, under which the company received foreign currency.
“We have been told by our perm sec that ‘there is no forex for you guys at the reserve bank, you must look for your own forex,” Chivaura said.
And speaking at the same event, John Mangudya, the central bank governor, concurred with Muchemwa saying government should consider “macro-economic factors instead of micro-economics”.
“We had not been having power cuts for the past four or five years, but this was courtesy of the RBZ overdraft to government and this is something that people need to know.
“So while we had power every day for five years, we were paying for this in debt as a country,” he said.
“Now ZESA does not have enough local dollars to buy foreign currency because they have a sub-economic pricing system and that people do not pay,” he added.
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