Simply Economics, from Mexico

Advancing Autonomy in Spain, Zimbabwe’s Economic Turnaround

Possible advances in the autonomous state in Spain as the Foro Económico de Galicia proposes reforms for the autonomous financing system. The Central Bank of Zimbabwe's impossible mission to save the economy reaches 100 days with a stable currency and controlled price pressures. Gain insights into the potential impact of autonomy reforms in Spain and the economic turnaround in Zimbabwe.Sources:https://cincodias.elpais.com/economia/2024-07-06/avances-posibles-en-el-estado-autonomico.htmlhttps://www.bloomberglinea.com/2024/07/07/la-mision-imposible-del-banco-central-de-zimbabue-para-salvar-la-economia-cumple-100-dias/Outline:(00:00:00) Introduction(00:00:39) Possible advances in the autonomous state(00:03:28) The Central Bank of Zimbabwe's impossible mission to save the economy is 100 days old

Duration:: 6m
Broadcast on:: 07 Jul 2024
Audio Format:: mp3

Possible advances in the autonomous state in Spain as the Foro Económico de Galicia proposes reforms for the autonomous financing system. The Central Bank of Zimbabwe's impossible mission to save the economy reaches 100 days with a stable currency and controlled price pressures. Gain insights into the potential impact of autonomy reforms in Spain and the economic turnaround in Zimbabwe.

Sources:
https://cincodias.elpais.com/economia/2024-07-06/avances-posibles-en-el-estado-autonomico.html
https://www.bloomberglinea.com/2024/07/07/la-mision-imposible-del-banco-central-de-zimbabue-para-salvar-la-economia-cumple-100-dias/

Outline:
(00:00:00) Introduction
(00:00:39) Possible advances in the autonomous state
(00:03:28) The Central Bank of Zimbabwe's impossible mission to save the economy is 100 days old

Good morning, and welcome to Simply Economics from Mexico. It's Sunday, July 7th. On today's show, we'll discuss possible advances in the autonomous state and the Central Bank of Zimbabwe's 100-day-old mission to save the economy. Plus, stay tuned for more economic news from Mexico. This coverage and more up next. I'm David, and you're listening to Simply Economics from Mexico. Spain has undergone a remarkable transformation in the past half-century, evolving from a highly centralized country to one of the most decentralized in the world. However, territorial and institutional challenges remain that require a broad agenda of reforms. Here to discuss the current state of Spain's autonomous system and potential paths forward is our economics correspondent. So tell us, what are some of the key issues facing Spain's decentralized model today? Well David, there are several critical challenges, including a scarcity of resources available to the autonomous communities, arbitrary disparities in per capita financing, limited tax capacity, and a lack of incentives for effective use of funds. The system is also excessively complex, making it difficult for citizens to understand and correctly assign political responsibilities. Additionally, there are problems with fiscal stability at the autonomous level. Those sound like significant hurdles. Is the current institutional framework equipped to address them? What types of reforms are being proposed? Experts argue the current institutional scaffolding is weak and requires structural reform to align with the country's territorial realities. Improving financial decentralization will mean strengthening governance institutions of the autonomous communities and adopting more of a federal culture that promotes effective, supportive co-governance between national and regional authorities. Equity between territories seems like it would be a major sticking point. How might a reformed system address leveling of resources between autonomous communities? Interterritorial, equity, and leveling are definitely some of the most complex issues. Politically, a crucial point will be deciding whether leveling of resources between regions should be applied fully or partially. The current quota system and Canary Islands Special Regime would need to adapt to new redistribution rules. Experts also call for correcting arbitrary outcomes under the current common system and adapting the methodology for calculating the adjusted population to ensure more equitable distribution. And what about the debt some autonomous communities have accumulated? How might a reformed system handle that? There are proposals to gradually phase out the extraordinary liquidity mechanisms used by some regions over the past decade. This would involve reducing access to these mechanisms and finding ways to fairly metabolize accumulated debt while ensuring equitable treatment for communities that use them less or not at all. Establishing clear deficit targets and agile adjustment mechanisms going forward will also be key to avoiding distortions in regional financial planning. The path forward for Spain's decentralization push isn't straightforward, but the country seems likely to continue working to strengthen its federal model as it navigates this complex web of political and economic issues. Turning now to economic developments in Africa, Zimbabwe's new central bank governor John Mushai Ivanhu has made significant strides in his first 100 days in office. He's introduced a new currency called the Zig, or Zimbabwe Gold, which has brought some much-needed stability to the nation's economy. The Zig replaced the Zimbabwean dollar, which had lost 80% of its value against the US dollar in 2024. For more on this, we turn to our correspondent. What can you tell us about the impact of the Zig so far? The introduction of the Zig has been a major milestone for Zimbabwe. Since its debut on April 8th, the currency has remained relatively stable and has helped keep monthly inflation in check. This is partly due to Governor Mushai Ivanhu's zero-tolerance policy for the parallel market, which has been blamed for speculation in the past. Law enforcement has been cracking down on street currency traders. The International Monetary Fund team that visited Zimbabwe last month praised the governor's efforts in ending the country's monetary instability. Zimbabwe's President Emerson Mangagua has even suggested that the Zig could become the sole legal tender within two years, ahead of the current 2030 deadline for ending the multi-currency system. How has the business community reacted to these developments? Sciences and investors who have lived through Zimbabwe's multiple currency crises are understandably skeptical. While the governor has made solid progress in achieving exchange rate stability, lower inflation, and a functioning local currency, the question remains whether these gains are sustainable. The country is currently facing challenges such as an El Nino-induced drought and lower commodity prices, which could impact the availability of US Sim. There's an effect currency stability. Some retailers like O.K.'s Zimbabwe-ledded have already noticed a decline in foreign currency collections in favor of the Zig. Despite these concerns, the central bank seems committed to staying the course. Deputy Governor Innocent Macha has stated that Governor Mushai Ivanhu is serious about sticking to fundamentals and returning the central bank to its core functions. It will be interesting to see how Zimbabwe's economic situation develops in the coming months and years under this new monetary policy. Thank you for your insights, correspondent. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics from Mexico. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]