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"In the Hotseat" speaks to Zimbabwean Economist Eric Bloch (Part 2)
Violet Gonda, SW Radio Africa
September 28, 2006

Violet: Welcome to the final segment of our two part series with Eric Bloch one of the advisors to Gideon Gono, the Governor of the Reserve Bank of Zimbabwe. This week some of the questions we ask the economist are - how much of Zimbabwe's economic downturn is a result of mismanagement and poor governance, and why is he working with a government that doesn’t seem to take his advice?

But first I asked him about Gono’s position as governor of the Central Bank. He seems to have become a law unto himself and is seen as determining economic policy without even referring to Finance Minister Herbert Murerwa.

Bloch: First of all his position is a constitutional one and the primary role of the Reserve Bank is monetary policy but that does not preclude a Reserve Bank engaging in such fiscal matters as government is prepared to let him do – that’s in effect a matter of governmental delegation and I believe the Reserve Bank stance has been a very simple one. Better that it does it than that no-one does it at all and I’m inclined to agree with that –whilst many of the things I would prefer to see done by government, if government doesn’t do it and is prepared to let the Reserve Bank do it, then that’s better than it not being done at all.

Violet: But some political and economic experts have said that it looks like the Reserve Bank is insulating Mugabe from political fallout and also implementing fiscal policy. Now should it be doing that?

Bloch: It can’t take a political role. It can initiate and implement fiscal policy to the extent that government is willing to let them do so and if that is economically beneficial then it should do so without regard to the political aspects. We must be capable of dividing the politics and economics to such limited extent as we can. I would rather see the Reserve Bank undertake certain fiscal issues than see even more people starving, suffering ill health and dying. If I’ve got to strike a balance between seeing intensified suffering and greater deaths as against the unusual situation of a Central Bank engaging in certain fiscal policy matters with the consent of government then I’d rather do that than see things worsen even more for people.

Violet: But it seems, you know, Gono’s tenure has been very very high profile and analysts say he’s effectively now the defacto prime minister determining everything from economic to social policy. Do you agree with this?

Bloch: No I don’t. I do agree that it was and is very high profile and I think this is really something that is attributable to the former Minister Of Information & Publicity Jonathan Moyo because at the time when Gono was appointed, Jonathan Moyo made sure that all of the state owned media heralded his appointment as something verging on the Messianic and that this was going to bring about the miraculous transformation of the economy. So he projected Gono into a very very high profile situation and it created a crisis of expectation which has continued all the time so to that extent I firmly agree. Insofar as the suggestion that he is now the defacto president or defacto prime minister, that to me is a lot of hogwash which is merely spouted forth by those who are opposed to anything that smacks of the government here and I’m well known for the extent of my opposition to government and I don’t believe that when we are opposed to something we should allow that to blind our reality. The reality is that this country is a dictatorship although it pretends to be a democracy and the dictatorship is the top hierarchy of Zanu PF in general under the leadership of the president and the presidium. So Gono only has the ability to do what they are willing to allow him to do therefore he is not heading the country. That is a gross misconception and coloured by distorted visions of people because of their understandable resentment of the very poor conditions that do prevail here.

Violet: But who should take instructions from who? Because at present it looks like the finance minister is taking instructions from the Reserve Bank Governor. Shouldn’t it be the other way round?

Bloch: It may look like it but that’s not the facts. It may look like it but the fact remains that anything that is outside of monetary policy that the RBZ wishes to do has to be cleared with the President and the cabinet inclusive of the Minister of Finance first. So that is perception not fact.

Violet: So now you’re one of the economists advising Gono, and as we said his profile has risen, he’s the man in the news but at the end of the day what has he actually achieved during his tenure, are you able to just give us a brief on this?

Bloch: I would say the biggest thing he has achieved is that things are not even worse. If it wasn’t for what he’s been doing, then I believe that instead of our having inflation of 1204%, we would be at inflation of 10000%. And instead of 100’s of people dying of malnutrition it would be 1000’s of people dying of malnutrition. We would not even have any membership of international bodies such as the IMF even if our memberships are under certain restraints at the present time. He has achieved all that, he has progressively motivated government to make some changes even if it wasn’t everything that we do need. So the bottom line is while I’m obviously very concerned and distressed about the circumstances here and I don’t hesitate to speak out about it continuously; nevertheless I believe that our circumstances would be even worse if it was not for the efforts of Dr Gono.

Violet: So now how much of Zimbabwe’s economic downturn is environmental and how much is a result of economic mismanagement and poor governance?

Bloch: I would say that it is 100% as a result of governmental mismanagement. There have been attempts by government on numerous occasions to suggest that the problems were environmental or climatic, the impacts of drought. But had we organised agriculture correctly we would have easily have handled the consequences of such drought as we have. And secondly, government has tried to suggest it is because of the actions of various other states against Zimbabwe but first of all most of those actions are not factual.
For example, the continuing allegation that we are the victims of illegal international sanctions. Number one, it’s up to any country to decide whether to impose sanctions or not and therefore there’s no issue of illegality but secondly in practice, the sanctions are targeted sanctions against individuals and not sanctions against the country, so those are the 2 things that government has tried to suggest have been the causes of the ills. The reality is that the economic ills have been totally caused by government’s gross mismanagement of the economy and mismanagement of government.

Violet: Would you say there’s a crisis of governance?

Bloch: Oh yes, I think most definitely so. The government in the country is founded upon the survival of those in power and not the genuine wellbeing of the populace.

Violet: And let’s just go back to this issue of sanctions. Robert Mugabe has on many occasions blamed the economic crisis on targeted sanctions imposed by western governments. For example does the Zimbabwe Democracy and Economic Recovery Act imposed by the United States, impose financial sanctions on Zimbabwe as Mugabe says?

Bloch: I totally disagree. In the first instance the principle provisions under the Zimbabwe Democracy Act are related to our trade relations and our borrowings from the IMF. Now, no bank in the world will lend money to a borrower who fails to repay and who has little prospects of repaying because of the state of the borrower’s affairs. So whether the Act existed or not the reality is that the United States and other countries would have to vote against the IMF giving new advances to Zimbabwe until we have brought our house in order. There is nothing under the United States legislation which bars Zimbabwe from trading with the United States.

And in-fact the United States is buying more from Zimbabwe than it’s selling to Zimbabwe. There is a net favourable trade balance in favour of Zimbabwe – last year of over US$60million. The same applies with the European Union - there is a net favourable trade balance in favour of Zimbabwe of over 360 million euros that’s not indicative of true sanctions. All they are, are certain limited constraints that - no.1) Zimbabwe is not receiving the special incentives under the American GOA programme for the advancement of Africa until we meet the requirements to qualify for those incentives and no.2) that America votes against the IMF and they are making advances to Zimbabwe but beyond that we continue to have normal economic and commercial relations with the United States which shows that we are not really victims of international sanctions.

Violet: So in your view do you think the targeted sanctions should remain in place?

Bloch: Absolutely. I believe any country has a right to say ‘we don’t want people that we disagree with coming to our country. We don’t want people that we feel do not meet the norms that we require to enjoy the benefits of our country. So I can see no reason why targeted sanctions should not be applied by those who feel that way. That is their right.

Violet: Wasn’t your name actually on the sanctions list?

Bloch: Well that came off within 30 days and it was confirmed that had been entirely due to an error. I was removed from that list within 30 days because it had actually been an error merely because I was on the Advisory Board of the Reserve Bank and the intentions of that sanctions list was to apply travel sanctions against those who were supporters of the ruling party and the country concerned acknowledged that was not the case and thereby should never have been put on the list. And in-fact I have since then been on a visit to Australia. I came off the list 30 days I went on it and I have since had a very very enjoyable holiday to family of mine in Australia.

Violet: Now others will ask then that if there is so much mis-governance in the country why is someone with your reputation working with a government that does not seem to either take your advice or why are you working with a regime that is going down the hill? You know why are you… (interruption)

Bloch: I am not. I am not working with the government of this country at all. In fact I am a frequent voice against. What I am doing is I am giving advises to the Central Bank as to measures that I believe are necessary to improve the lot of a very very distressed people. And I believe it would be criminally wrong of me to withdraw whatever limited skills I have from trying to improve the lot of any people who are suffering in the extreme. The way to bring about change is not to kill off the populace.

Violet: From what you have said… (interruption)

Bloch: I get distressed when I see the starvation that exists. When I come to work in my offices in the morning and I see the people who are sleeping in the pavement because they have no housing at all and you are emaciated in the extreme. Do I then have any moral right not to give advises to the Reserve Bank which may even marginally address some of that.

Violet: But still on that issue. From what you have said in terms of advising the Central Bank, it appears that some of you advice is not being listened to or it’s not being taken…

Bloch: sure

Violet: So why are you, what’s in it for you if you are not being listened to?

Bloch: The fact that some of my advice is not taken doesn’t mean that all of my advice is not taken. I respect the right of others to evaluate the advice I give and to accept what they deem fit and not to accept other advices – number 1. Number 2 - even when I believe they should deem fit to take advice, if some of my advices are helping to minimise (the suffering) of the people should I even withdraw those advices thereby contributing to a worsening of the distress that Zimbabweans have. I want to be able to sleep at night and I can’t sleep at night if I know that I have withheld advice which might – even very very slightly insignificantly - make things a little bit better for someone. It is through my advises some businesses continue operating and therefore some people continue to have jobs and therefore they can still support themselves, their wives, their children, their in-laws and so on. Should I withdraw my advice so those businesses also close down and that even more join the ranks of the starving and the dying? How am I supposed to live with myself if I do that?

Violet: So what would be your biggest piece of advice to the government right now, which u think can transform the Zimbabwean economy?

Bloch: No.1 We have to have an absolute respect for human rights. We must not allow actions such as Operation Murambatsvina or the beating up of ZCTU people when they protest. We must allow a genuine restoration of democracy. We’ve got to ensure that we have a genuinely free and fair judiciary. We have to reconcile with the international community. We have to have fiscal probity encompassing very constraint governmental spending on only the right areas. That we should be spending what’s necessary on health, education, social welfare before spending on buying fighter aircrafts which we don’t need because we are not a country at war. That type of fiscal probity linked at the same time with the other type of fiscal probity and that is the containment of corruption.

You have to be prepared to deregulate the economy. Move away from the command economy to one which is driven by market forces. We have to make investors feel welcome here and feel secure here and know that they are not at risk of their investments being mandatory taken away from them at a later date. All these are the things necessary to bring about the change to which could be that Zimbabwe could economically be the second strongest country in sub-Saharan Africa. With less misery, less poverty, less starvation than any other country on this continent other than perhaps South Africa. That’s what we could do provided we do those things.

Violet: And would you know what the internal moods within the power structures are and what are their greatest fears?

Bloch: No. I am not a member of ZANU PF I never have been and I never will be therefore I don’t know what happens within the politburo or in the central committee and other bodies & organs of government. I would only speculate on.

Violet: Have you ever tried advising Mugabe himself?

Bloch: No I have had the odd occasion when we have had talks briefly but I don’t think he would see me as a very dishonourable advisor.

Violet: Why not?

Bloch: Because he is fully aware that my advices would not be palatable to him.

Violet: Do u think Mugabe is in control of the economic policy?

Bloch: I think to a very very major extent yes but sometimes misguidedly so in that I don’t believe he has always been fed completely factual information. I fear that very often those accountable to him choose to tell him what suits them to tell him rather than what is necessarily the position. So hence he may not be making the right decisions when he is trying to control things.

Violet: Would you know some of the people who are ill-advising him?

Bloch: We I have got to assume that it has to be primarily ministers, deputy ministers and permanent secretaries of some of the ministries because those are the key ones who have to advise him, as is the case of any government.

Violet: And before we go, can we just talk briefly about the issue of printing money. Gono said he printing money to pay the IMF. Now should Zimbabwe be printing money to pay its foreign currency debt?

Bloch: Normally I am very much against any country printing money excessively because it is inflationary. So the general rule I am very opposed to it. But I also believe that for every rule there is an exception. That very occasionally there are special circumstances and that the end justifies the means. Now although he printed a lot of money in February in order to raise the foreign currency to make payments to the IMF what is heavily overlooked was that if he hadn’t bought that foreign currency from the various NGOs and embassies and the likes that money - to a major extent would have moved into the parallel market. And that is just as much a fuel-lent of inflation if not more so. So he wasn’t doing a lot of harm with that. Secondly, what was overlooked tremendously was that at that time there were very very high statutory reserve requirements imposed from all banks – in terms of which 65% of all deposited money had to be placed with the Reserve Bank. So all the money that he printed and which then landed up in the banking sector, in the accounts of the NGOs and the embassies and the likes – 65% of it went straight back to the Reserve Bank and therefore it didn’t have an inflationary effect at all. So that minimised the inflation considerably. And thirdly, there after through the current exchange situation that took place in August that has taken a tremendous amount of printed money out of circulation. Over ZW$35 trillion of the old money – less than $35 trillion, the equivalent -was pumped back in. So the actual inflationary consequences of that printing was relatively limited as against the benefits of demonstrating our will to try to address our debt, it was advantageous. So I believe it was a one off justification. But I am against the printing of money for such purposes as funding the running of governments.

Violet: I was going to say – so do you think IMF was to blame here since you say Gono had no option but to print the money?

Bloch: No I don’t believe the IMF were to blame. They had the perfect right to expect to receive a payment. The payment was overdue and any lender has a right to receive payments. They didn’t ask Gono to print money. They simply said ‘Zimbabwe you owe us the money and you better start doing something about paying it.’ The fact that Reserve Bank then decided to fund it this way can’t be blamed on the IMF.

Violet: Thank you very much Mr Eric Bloch.

Bloch: Ok then, bye.

*Comments and feedback can be emailed to:violet@swradioafrica.com

Part 1

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