We predicted this would happen and are not surprised at all. The ban on loans by president Mnangagwa and the RBZ was ill-advised and bound to cause a lot of chaos and turmoil in the economy. The ban was issued without consulting various stakeholders who expressed discontent at being excluded from the decision-making process. The RBZ had to make some exceptions but that was not enough, we predicted, that the bank would soon claim a hollow victory and lift the ban in order to save face.
Below is the statement from the RBZ:
Flip-flopping, chaos and factionalism
They might like to deny it all they want but there are two ways to describe the Zimbabwean government when it comes to its economic policies. They are either hopelessly incompetent or they deliberately leave loopholes in the economy. Personally, I cannot decide which is it. There was no doubt that the loan ban was a bad idea, there is a reason why banning loans is never even considered an option in economics texts. You can use interest rates and money supply to control lending (monetary policy) and simply go after the criminals you want to hunt instead of bringing the entire economy to a screeching halt.
This was all done without consulting important stakeholders or going through parliament where others would have provided vital input to the issues in question. Instead the bans were issued with immediate effect. It’s hard to fault the president here. He is not an economist instead his lieutenants sat behind him stone-faced as he announced these measures. Both are experienced experts who ought to know better. This was never going to work like other similarly radical policies before it. This puts the government in a difficult position. They either soldier on or are forced to look like idiots and reverse nascent policies all the time.
The established pattern these days is an unworkable policy is introduced e.g. a loan ban or scrapping the multicurrency, the government works full time to defend the indefensible, the policy wreaks havoc on the economy and then eventually the government this forced to admit that the policy is not working and scraps it. They do so in a face-saving way by claiming that they have achieved some great results and have been planning to scrap this policy all along. The technical term for all this is flip-flopping.
Then there is what appears to be factionalism with another sector of government officials coming out and screaming against certain policies which another sector praises. Each faction’s policy is enforced in turn after the other faction’s policies and views are reversed. There is no coherence and there does not seem to be a clear long-term plan detailing what the RBZ governor and his Finance Minister want to achieve. They keep claiming the economy is doing well while most people are getting poorer and inflation is rising and claim there is no economic crisis even though their desperate policies seem to suggest they are trying to fix this crisis despite denying its existence.
In the end, we have this flip-flopping, the flailing economy and a confused populace who have lost track of their coordinates as the Zimbabwean economic ship spins and spins. For the most part, it appears like the spinning is being induced by the captain, Mthuli Ncube and his first mate, the RBZ governor who keep stirring wildly without any apparent purpose or set destination in mind.