Neo-liberalism, debt management

ZIMBABWE’S governance position between liberalism and neoliberalism in fighting its economic plunge has contributed to the county’s debt crisis, which has affected women the most.

A tight grip on markets, trade barriers, political interference, and inefficient public policies impede economic recovery and gender equality.

Deregulation of markets

The introduction of numerous fiscal Statutory Instruments (SI) has been regarded as the government’s move in overstretching its control into market mechanisms, thereby inflicting imbalanced demand and supply.

The SI 127 of 2021 on foreign currency which was meant to encourage forex trading through the auction system resulted in a higher demand for the USD and a scarce supply of the same as auction and free market USD exchange rates were and still are markedly contrasting.

As a result, the parallel market has been fuelled due to arbitrage activities on the auction system.

However, majority of the poor are women and lower exchange rates are beneficial to them as they can access the USD which is needed to support the informal trades (largely import based).

Deregulation addresses the free market setbacks currently witnessed, but has historical evidence of equally impoverishing women while simultaneously improving economic efficiency.

Separation of the monetary policy and debt management is difficult in current economic conditions as the government’s printing money as a solution to address budget deficits has subsequently led to allocative distortions, inflation, price controls and over regulated markets.

Sectors of highest economic returns have become highly taxed and unstable resulting in lower GDP and unsustainable public debt.

Gender responsive budgets and strategies are needed to implement economic efficient markets and controls.

Free trade

The implementation of the African Continental Free Trade Area (AfCFTA) ameliorates limitations of intra-continental trading such as outdated border and transport infrastructure.

The region’s intra-trade ranks much lower at 17% compared to America, Asia, and Europe whose trades stand at 55%, 59% and 68% respectively as African countries have been mostly focused on individual economies by creating trade barriers to protect local markets from regional and global competition.

While the continent’s overall economic growth stands to be realised through this agreement, income gains will not be uniform as the World Bank predicts that while Zimbabwe may realise a 14% revenue increase, countries such as Mozambique may realise lower end gains of about 2%.

This uneven distribution of African wealth will result in regional gender inequality as women in specific economic regions will benefit from better paying and better-quality jobs, while other regions will remain in poverty and suffer adverse emigration.

While an increase in foreign direct investment (FDI) will contribute towards debt management for thriving economies under the AfCFTA, other countries will reap limited access to trade finance resulting in unequally high GDP- to-debt ratios.

The emergence of regional concessional lenders and effective aid to support low-gain countries becomes imminent.

Africa’s potential regarding agri-food value chain trading dominates the export markets and is likely to increase if support is directed towards democratising and digitising the agriculture sector while including trade by micro and small enterprises where women largely participate in.

This will not only improve gendered revenues, but also include women in rural areas to participate in higher income generating trade.

Independent central banking

Neoliberalism philosophies require for minimal government interference on economic activities.

This means that politically influenced economic activities such as increased money supply are controlled.

The current consideration by the central bank to adopt a currency board speaks to the impact of increased money supply in the country which has led to a spike of the inflation rate to 285% as well as the need to control local currency value by backing it with international reserves.

Women are often disadvantaged from financial and policy exclusion due to lack of capital, collateral, knowledge, information, and skills required to participate and benefit from economic activities.

The role of the RBZ is to develop an enabling policy ecosystem, customise financial products, and build financial literacy capacity for women.

The RBZ through the Export Credit Guarantee Corporation, underwrites up to 50% of women owned MSMEs collateral required for their credit facilities.

The RBZ also developed the gender-responsive economic management policy initiative to promote gender equality in all economic sectors.

If women, accounting for much of the population in Zimbabwe, access financial and economic opportunities, the country stands to witness increased economic efficiency, reduction in poverty, and less reliance on subsidised commodities and services.

A reduction on social spending to cater for the poor by the government will allow for rechanneling of revenue to service the public debt without hefty taxes.

Privatisation

Neoliberalism perspective on national resources is that public ownership is not limited by profit and loss and as such, entities may be losing extensive amounts but continue operations.

Zimbabwean publicly owned institutions such as CSC, Silo Food Industries and POSB etc., were put in the forefront for privatisation to enhance efficiency of the institutions’ gains and operations.

However, the investment appetite, marked against privatisation potential run contrary due to political interference in privatisation processes and low foreign direct investments resultant from a country still being perceived as a hostile and risky investment environment.

While there are apparent benefits of privatising the institutions in terms of improved efficiency, lack of political interference and increased public revenue, thorough frameworks and processes of privatisation have to be implemented centering around high standards of transparency and accountability.

Where transfer of ownership affects conditions of employment, agreements with purchaser must be established regarding reassigning employees, compensation of loss of civil servant status and/ or future employment conditions.

Women account for 64% of public sector employment and an effect on working benefits, job security and wages also affects the overall gender responsive strategy of the country.

There is need for gender inclusion of gender variables  in the design and implementation of privatisation policies and processes.

When there is an imbalance of social and economic indicators, the short-term success of privatisation misleads human and social enhancement strategies resulting in high institutional efficiencies and higher levels of foreign direct investments albeit at the expense of displaced workers, lower wages and increased financial instability.

Government role

While the introduction of Statutory Instrument and other economic policies have been developed to curb unsustainable inflation and parallel market activities, the same have restricted competition in the market limiting consumer spending choice and power.

Efficiency of government and local authorities spending has been criticized by audits year on year as corruption and lack of transparency overwhelm effective implementation and regulation of public budget and finances.

A neoliberal stance on public finance management will allow for government’s involvement in economic activities and service delivery to be minimal while reducing sector budgets. Smaller governments and subsequent budgets allow for efficient allocation of public resources and revenue collection.

The impact of efficient governments on women effectuates fair taxation, economic stability, and provision of efficient social services.

Zimbabwe, crippled by debt, requires economic development and growth to service its debt obligations without impoverishing the majority especially vulnerable women.

The country’s governance policies and processes require a balance of economic freedom and efficient social protection. While free markets pose as the way forward for the country’s economic recovery, there is need for gender inclusive frameworks and strategies on how neoliberalism is implemented.

Jaravaza is a policy analyst and she writes in her personal capacity. These weekly New Horizon articles published in the Zimbabwe Independent are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society (ZES) and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). —  [email protected] and mobile No. +263 772 382 852.

 

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