'Zimdollar in short supply'

FINANCE minister Mthuli Ncube yesterday claimed that the Zimbabwe dollar was in short supply while insisting that speculative behaviour was distorting the value of the local currency.

"The Zimbabwean dollar is in short supply. If you got 0% growth in the money supply, then this currency is not in abundance, but actually in short supply. So, what is driving the exchange rate is speculative behaviour in some of the monopolies," Ncube said at a post-Cabinet briefing question-and-answer session.

He made the remarks after the Zimbabwe National Statistical Agency (ZimStat) last week announced that the country's year-on-year inflation had shot to 131,7% up from 96,4% in
April.

Former Finance minister Tendai Biti, in an interview with Alpha Media Holdings' HStv talk show last week, said government was living beyond its means, and printing money to fund infrastructure development projects.

But Ncube rubbished the claims yesterday.

"The government has taken steps to make sure that in its financing of necessary infrastructure development, it does not contribute to exchange rate volatility, indeed, on inflation acceleration," Ncube said.

"We have taken two critical steps. One is to pay contractors using the foreign formula, 50% in US dollars and 50% in Zimbabwe dollars.

"We have taken those actions and we have a committee between Treasury and the central bank which is called the liquidity committee, which manages the liquidity situation in the entire economy."

Government has also eased control on the official exchange rate, allowing it to converge with an interbank rate, but has since spiked to $308:US$1 as of yesterday.