News / National
Zimdollar introduction timely, says Mthuli Ncube
10 Aug 2019 at 08:54hrs | Views
FINANCE and Economic Development Minister Professor Mthuli Ncube yesterday said the introduction of the Zimbabwe dollar was timely as the country has registered macro-economic fundamentals that will promote stability of the local currency.
Speaking during a Mid-Term budget review breakfast meeting in Bulawayo, Prof Ncube said as highlighted in the Mid-Term fiscal policy statement, there was a host of positive macro-economic fundamentals supporting the introduction of the local currency. Such fundamentals, he said, included the reduction in current domestic debt and fiscal deficit and suspension of Treasury Bills issuance.
Underpinned by the above positive macro-economic fundamentals, Prof Ncube said the introduction of a local currency was timely.
"We have closed the twin deficit (current account deficit and fiscal deficit) and that's very important. I am always asked that Minister was it the right time to introduce the Zimbabwe dollar? The answer is yes, I repeat the answer is yes.
"We cannot introduce a stable domestic currency if you are running a large budget deficit and an alarmingly large current account deficit . . . so, this position is ideal for managing a stable domestic currency," he said.
Zimbabwe re-introduced the local currency as a sole legal tender towards the end of June this year through the promulgation of Statutory Instrument 142 of 2019 to bring back normalcy in the economy as the monetary authorities noted a cocktail of challenges that were caused by the adoption of a multicurrency regime.
Such challenges included financial distortions in the formal market that were caused by the parallel market. The country had been using a multicurrency system since February 2009 and prior to the liberalisation of the economy, inflation had reached unprecedented levels.
Underpinned by the two-year Transitional Stabilisation Programme adopted in October last year, Prof Ncube said the country's current domestic debt level was receding and as at the end of June, it stood at $8,8 billion from $9,5 billion during the same time last year.
"Also the fact that domestic expenditure is not growing means that money supply growth is under control.
"We are targeting reserved money or high-powered money as long we can target a specific growth on that we are good. Money supply not growing too fast, current and budget deficit under control, and we are able to support production, we are good.
"We are certainly going in the right direction in terms of the macro-economic picture," said Prof Ncube.
He reiterated that Government has also stopped issuance of short-term Treasury Bills to finance previous budget deficits adding that suspending issuance of Treasury Bills was an indicator of a positive macro-economic performance. In the last four years, the Government issued short-term Treasury Bills amounting to $9,5 billion by end of December last year.
"I am happy to report that we have curtailed issuance of Treasury Bills, we have only issued something in the order of $230 million just to manage cash flows but also to test the market," said Prof Ncube.
He said Government expects to issue long-term infrastructure bonds to promote infrastructural development. On the current account, the Minister said Zimbabwe has closed the budget deficit with the country registering a surplus that was close to $200 million and this was better than almost half a billion dollars deficit incurred during the same time last year.
Prof Ncube said in the first six months of the year, Government revenues amounted to about $5 billion against expenditure of $4,2 billion. He said even though expenditure was ahead of what was budgeted, cumulative budget savings or surplus for the period under review stood at $803, 6 million. Prof Ncube said the Government was also committed to cushioning the public service.
"So in January we did the cushion of $63 million and then 1st of April, we did another Cost of Living Adjustment (Cola) worth about $400 million and then last month we did another once off cushioning allowance worth about $143 million.
"And now we are finalising discussions over Cola again so that our civil servants are looked after and then in November obviously it is now tradition, we will pay them an annual bonus.
"So we are doing everything we can to cushion our civil servants, they work so hard," he said. During the breakfast meeting, the private sector recommended that the current account surplus the country was incurring should be channelled towards revitalising local industry.
"We have a budget surplus of $800 million and we also have about $200 million on the current account. The proposal from industry is can you (Prof Ncube) commit this money to the productive sector.
"We really appreciate from your presentation that you are doing a lot but we think more needs to be done as we all know that our problem in Zimbabwe is production, we need to increase our production. We need to do all we can to drive production," said Confederation of Zimbabwe Industries (CZI) Matabeleland Chapter president, Mr Shepherd Chawira.
Speaking during a Mid-Term budget review breakfast meeting in Bulawayo, Prof Ncube said as highlighted in the Mid-Term fiscal policy statement, there was a host of positive macro-economic fundamentals supporting the introduction of the local currency. Such fundamentals, he said, included the reduction in current domestic debt and fiscal deficit and suspension of Treasury Bills issuance.
Underpinned by the above positive macro-economic fundamentals, Prof Ncube said the introduction of a local currency was timely.
"We have closed the twin deficit (current account deficit and fiscal deficit) and that's very important. I am always asked that Minister was it the right time to introduce the Zimbabwe dollar? The answer is yes, I repeat the answer is yes.
"We cannot introduce a stable domestic currency if you are running a large budget deficit and an alarmingly large current account deficit . . . so, this position is ideal for managing a stable domestic currency," he said.
Zimbabwe re-introduced the local currency as a sole legal tender towards the end of June this year through the promulgation of Statutory Instrument 142 of 2019 to bring back normalcy in the economy as the monetary authorities noted a cocktail of challenges that were caused by the adoption of a multicurrency regime.
Such challenges included financial distortions in the formal market that were caused by the parallel market. The country had been using a multicurrency system since February 2009 and prior to the liberalisation of the economy, inflation had reached unprecedented levels.
Underpinned by the two-year Transitional Stabilisation Programme adopted in October last year, Prof Ncube said the country's current domestic debt level was receding and as at the end of June, it stood at $8,8 billion from $9,5 billion during the same time last year.
"Also the fact that domestic expenditure is not growing means that money supply growth is under control.
"We are targeting reserved money or high-powered money as long we can target a specific growth on that we are good. Money supply not growing too fast, current and budget deficit under control, and we are able to support production, we are good.
"We are certainly going in the right direction in terms of the macro-economic picture," said Prof Ncube.
He reiterated that Government has also stopped issuance of short-term Treasury Bills to finance previous budget deficits adding that suspending issuance of Treasury Bills was an indicator of a positive macro-economic performance. In the last four years, the Government issued short-term Treasury Bills amounting to $9,5 billion by end of December last year.
"I am happy to report that we have curtailed issuance of Treasury Bills, we have only issued something in the order of $230 million just to manage cash flows but also to test the market," said Prof Ncube.
He said Government expects to issue long-term infrastructure bonds to promote infrastructural development. On the current account, the Minister said Zimbabwe has closed the budget deficit with the country registering a surplus that was close to $200 million and this was better than almost half a billion dollars deficit incurred during the same time last year.
Prof Ncube said in the first six months of the year, Government revenues amounted to about $5 billion against expenditure of $4,2 billion. He said even though expenditure was ahead of what was budgeted, cumulative budget savings or surplus for the period under review stood at $803, 6 million. Prof Ncube said the Government was also committed to cushioning the public service.
"So in January we did the cushion of $63 million and then 1st of April, we did another Cost of Living Adjustment (Cola) worth about $400 million and then last month we did another once off cushioning allowance worth about $143 million.
"And now we are finalising discussions over Cola again so that our civil servants are looked after and then in November obviously it is now tradition, we will pay them an annual bonus.
"So we are doing everything we can to cushion our civil servants, they work so hard," he said. During the breakfast meeting, the private sector recommended that the current account surplus the country was incurring should be channelled towards revitalising local industry.
"We have a budget surplus of $800 million and we also have about $200 million on the current account. The proposal from industry is can you (Prof Ncube) commit this money to the productive sector.
"We really appreciate from your presentation that you are doing a lot but we think more needs to be done as we all know that our problem in Zimbabwe is production, we need to increase our production. We need to do all we can to drive production," said Confederation of Zimbabwe Industries (CZI) Matabeleland Chapter president, Mr Shepherd Chawira.
Source - chronicle
