Wednesday, July 18, 2007

Only holistic framework can stabilise prices in Zim - Gono

Only holistic framework can stabilise prices in Zim - Gono
By Kingsley Kaswende in Harare
Wednesday July 18, 2007 [04:00]

RESERVE Bank of Zimbabwe (RBZ) governor Dr Gideon Gono is convinced that only a holistic framework can stabilise prices in the country, without inducing shortages in the market. Dr Gono said the country’s ongoing price reduction blitz must avoid the law of unintended consequences.

Dr Gono, the principal advisor on the economy, was understood to have criticised the price cuts in the country after he wrote to minister without Portfolio Elliot Manyika, who was then acting as chairperson of the cabinet taskforce of price stabilisation and controls, that it would create shortages in the market.

“Advice that is being given by me should not be misconstrued as opposition to the current price stabilisation measures that seek to cushion consumers against the unbridled profiteering we have been witnessing through daily and in some cases hourly price increases. That madness needed to be dealt with decisively,” he said.

The government directed that all prices be reduced by up to 50 per cent and then be frozen in a move criticised by the opposition MDC as an election gimmick.

Prior to the order, prices of commodities had shot up by over 300 per cent in a matter of days and the government said it would step in to cushion the consumers.

According to the government, this was the work of elements trying to use economic pressure to ensure an illegal regime change.

But, in what seems to be a reversal of fortunes, consumers that enjoyed the price cuts are now grappling with shortages of basic food products, which supermarkets have failed to restock adequately claiming that they no longer have reasonable returns in their businesses.

Dr Gono’s advice was that the price reduction should take a holistic approach and not crate shortages.

“To the extent that inflation control is the core function of the central bank and, therefore, of this governor, it is important that the nation realises that apart from attending to consumers’ plight, there is need to attend to the production side to avoid the emptying of shops without replacements the next day,” he said.

Dr Gono said it was important that the cost of any business be covered in the consumer’s final price paid, with an allowance for a “reasonable” profit margin.
He said the current price blitz needed to put more focus on the empowerment of the majority of people through a broad-based small and medium business development programme with roots in local ownership at the grassroots level.

Dr Gono had written to Manyika that a “holistic package of measures that would uplift the general supply of goods and services in the economy” was needed.

“I write to make recommendations on the ongoing efforts meant to stabilise prices in the economy,” Gono stated. “It is our strongest conviction that only through a holistic framework can we stabilise prices, without inducing shortages in the market.”

Dr Gono is one of a few people in the country who are close to, and have direct access to the president. He is touted by some as President Mugabe’s choice as heir apparent. But Dr Gono said he had no political ambitions and that he was not in bad books with some cabinet ministers and senior ZANU-PF members.

“I am not a politician, but a technocrat and practical governor of the central bank whose duty is, among other things to give advice to the government in its various forms and I’m doing exactly that without fear or favour. I do not hold any political ambitions either. As governor I hold an apolitical office in the land and I have no enemies in ZANU-PF, MDC or any other political party,” he said.

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