Business / Economy
Zimbabwe Finance Minister regrets import duty review
02 Sep 2011 at 07:40hrs | Views
FINANCE Minister Tendai Biti has expressed regret over his decision to restore import duty on selected basic commodities following the spate of price increases that ensued and is now putting massive pressure on inflation.
Following restoration of duty, annual inflation peaked at 3,3 percent in July yet it had been well contained below 3 percent in the first quarter of the year.
Minister Biti said Government had no role in business except creating the right macro-economic environment, but was sometimes forced to react.
He made reference to the financial impropriety that occurred at Renaissance Financial Holdings as cases that compelled Government to intervene.
Minister Biti was speaking during a Securities Commission of Zimbabwe and Zimbabwe Stock Exchange breakfast meeting on capital markets in Harare on Wednesday.
The finance minister also lamented the abuse of power by shareholders as witnessed in Hwange Colliery Company and Rainbow Tourism Group in deciding directors saying this was not in the best interest of everyone.
"Government has no role in business except to create an enabling macro-economic environment that enables you to create capital. Without the right macro-economic environment business can't function," he said.
In efforts to maintain the correct macro-economic conditions he said Government initially resorted to cash budgeting to keep suppressing inflation.
This has, however, been affected by the civil servants salary increases, which have spawned the spectre of a looming US$700 million budget deficit.
He said hyperinflation was a reflection of a breakdown of confidence in an economy or collapse of a social contract as far as keeping prices low is concerned.
The minister said it was critical to maintain trust, but once the trust was broken people start raising prices of goods and services in anticipation others would. But he had no kind words for businesses he said had let down Government's trust through the recent unjustified and unilateral price increases.
"You have let us down. I think I should not have removed duty, but you lobbied us to say minister we have sufficient capacity to handle production. And what do you do? There has been a sharp spike of inflation," he said.
Industry had lobbied Government for restoration of duty to give them market space in order to raise production and help the industry to recover.
Minister Biti, however, remains positive that despite the latest wave of price hikes the year end inflation target of 4,5 percent was still within range.
The minister said it was puzzling to understand how a business would simply wake up and decide to raise prices without underlying fundamentals.
This follows the price hike on such basics as mealie-meal, cooking oil, rice, salt and flour after the minister restored duty on these products in July.
He also said Government had been forced to intervene in many businesses and economic circumstances to ensure that harmony prevailed.
Following restoration of duty, annual inflation peaked at 3,3 percent in July yet it had been well contained below 3 percent in the first quarter of the year.
Minister Biti said Government had no role in business except creating the right macro-economic environment, but was sometimes forced to react.
He made reference to the financial impropriety that occurred at Renaissance Financial Holdings as cases that compelled Government to intervene.
Minister Biti was speaking during a Securities Commission of Zimbabwe and Zimbabwe Stock Exchange breakfast meeting on capital markets in Harare on Wednesday.
The finance minister also lamented the abuse of power by shareholders as witnessed in Hwange Colliery Company and Rainbow Tourism Group in deciding directors saying this was not in the best interest of everyone.
"Government has no role in business except to create an enabling macro-economic environment that enables you to create capital. Without the right macro-economic environment business can't function," he said.
In efforts to maintain the correct macro-economic conditions he said Government initially resorted to cash budgeting to keep suppressing inflation.
This has, however, been affected by the civil servants salary increases, which have spawned the spectre of a looming US$700 million budget deficit.
He said hyperinflation was a reflection of a breakdown of confidence in an economy or collapse of a social contract as far as keeping prices low is concerned.
The minister said it was critical to maintain trust, but once the trust was broken people start raising prices of goods and services in anticipation others would. But he had no kind words for businesses he said had let down Government's trust through the recent unjustified and unilateral price increases.
"You have let us down. I think I should not have removed duty, but you lobbied us to say minister we have sufficient capacity to handle production. And what do you do? There has been a sharp spike of inflation," he said.
Industry had lobbied Government for restoration of duty to give them market space in order to raise production and help the industry to recover.
Minister Biti, however, remains positive that despite the latest wave of price hikes the year end inflation target of 4,5 percent was still within range.
The minister said it was puzzling to understand how a business would simply wake up and decide to raise prices without underlying fundamentals.
This follows the price hike on such basics as mealie-meal, cooking oil, rice, salt and flour after the minister restored duty on these products in July.
He also said Government had been forced to intervene in many businesses and economic circumstances to ensure that harmony prevailed.
Source - TH
