Harare — THE floatation of Zimbabwe's troubled currency is indeed welcome news for a country grappling with an economic crisis for the past nine years.

For far too long, the pricing of the Zimbabwe dollar, against the backdrop of escalating inflation, had proved a very contentious issue, with government and the Reserve Bank of Zimbabwe (RBZ) often being forced to adopt draconian measures to encourage foreign currency inflows to the official market because foreign currency holders were not happy offloading at an unrealistic, fixed exchange rate.

They therefore resorted to the parallel market, which had thrived despite concerted government efforts to punish both buyers and sellers on the unofficial foreign currency market.

Some of the measures taken by both government and the RBZ did not encourage exports at all, and often resulted in many companies devising criminal schemes to evade forced disposal of part of their foreign currency receipts on the official market.

It was not only the companies that were forced into criminal activities to evade tight exchange controls that precipitated losses on disposal of their receipts on the official market; every Zimbabwean who accessed foreign currency, either from relatives in the Diaspora or from work done for employers entitled to pay in foreign currency, equally avoided the official market and instead diverted their earnings to the parallel market, which offered realistic rates reflecting the fundamentals on the ground.

They too became criminals due to the poor pricing of the Zimbabwe dollar on the official exchange market.

As events of the current week indicated, Zimbabweans did not necessarily want to evade the legal market in the disposal of their foreign currency; once the exchange rate on the official market became realistic, they trooped to the banks to sell their foreign currency, evading the parallel market and enduring the long queues in the banking halls.

As RBZ governor Gideon Gono pointed out in his monetary policy statement last week, the pricing of foreign currency is an important tool in the influence of the country's overall economic performance.

Acknowledging that the issue of currency devaluation rested with the Minister of Finance and was, therefore, outside the mandate of the central bank, Gono used his genius to employ the instruments within his job description to allow for the floatation of the Zimbabwe dollar without usurping the powers of his principals.

Highlighting the urgency of such measures, Gono said: "With over 80 percent of Zimbabwe's imports constituting critical inputs, machinery, spare parts, electricity, fuel and chemicals among many other essentials, smooth functionality of the foreign exchange market is a pre-requisite for enduring macroeconomic stability."

"In order to significantly move the economy towards stability, increased capacity utilisation, availability of basic commodities and, hence, reduced and declining inflationary pressures, it has become necessary that the pricing and allocative frameworks in the foreign exchange market be reformed in a manner that guarantees viability for all generators of foreign exchange, whilst at the same time ensuring availability and affordability of this resource to users of foreign currency, particularly the non-exporting producers of basic goods and services."

Apparently, even critics of the central bank governor have privately acknowledged that his latest move is indeed a bold one, and could provide the solution to Zimbabwe's entrenched economic predicament.

But the road ahead is still rough, and it is not yet time to pop the champagne bottles.

The liberalisation of the pricing of foreign currency should be quickly followed by the liberalisation of commodity prices, irrespective of whether these commodities are basic or not.

The control of commodity prices has been one other hold-up to efforts to turnaround the economy.

Again, as Gono pointed out, price controls "should be a transitory intervention".

Inevitably, these, as he points out, have often had "the unintended consequences of infringing on producer viability, in the long term constraining new investment in whatever sector, compounding maintenance progress, critical skills retention and sometimes promoting the parallel market activities".

How well that this is coming from the horse's mouth!

As The Financial Gazette pointed out in an article in May last year, the current regime of price controls, while meant to benefit the poor, had, in fact, benefited the rich and politically connected.

The government might have had good intentions in imposing market controls, but the record for such controls has simply proved unhelpful and dangerous to the economy, with widespread shortages and company closures ravaging the productive sectors.

We do recognise that the pricing of commodities is outside the sphere of operations of the central bank, but we take heart that Gono has exhorted respective government departments and ministries to move towards lifting all forms of price controls to complement his monetary policy measures.

On his part, Gono has meanwhile created a Strategic Price Controls Mitigation Fund under which producers of strategic and basic commodities can get financial support to, in his own words, "make up for and recover the genuine adverse effects of price controls and/or delays in the approvals of justified price reviews".

We do hope that government moves fast to eliminate price controls in the economy to boost supplies and ameliorate shortages.

The pricing of goods will work itself out in the market, as overpriced products will simply meet resistance.

Consumers are also likely to become temperate in their consumption patterns until the economy turns around.