News / National
Biti savages Chinamasa
19 Oct 2017 at 02:50hrs | Views
Former Finance minister Tendai Biti is of the view that his successor, Patrick Chinamasa, should take the blame for the economic crisis that followed the liquidation of the government of national unity in 2013.
A lawyer by profession, Chinamasa took over from Biti - also a legal practitioner - four years ago after the ruling party romped to victory at the 2013 polls to end an uneasy unity government in which Zanu-PF shared power with the MDC.
The 60 year-old Zanu-PF politician had faced criticism ever since he took over from Biti - then a former secretary-general of the MDC - for failing to introduce sound economic policies that could attract foreign direct investment and improve people's livelihoods.
There has been speculation that Chinamasa might have been demoted from the Finance portfolio about a week ago and reassigned to a less fashionable ministry of Cyber Security, Threat Detection and Mitigation owing to his poor economic policies.
In a wide-ranging interview with the Daily News on Tuesday, Biti, who is now leading the People's Democratic Party, said Chinamasa was to blame for the current economic crisis because of his alleged failure to understand economics.
He said when Chinamasa took over from him in 2013 Treasury operated a functional system, which is no longer the case.
"I think that the person of Chinamasa must take a lot of responsibility," said Biti, who felt that in other countries, the former Finance minister could have either been jailed or put before a firing squad.
"As a minister of Finance, you have a huge blank cheque and the law says you drive policy. If you read Section 7 of the Public Finance Management Act, it says you - the Finance minister - are the treasurer. There are three (people) mentioned (in the Act); there is the minister, as treasurer, the permanent secretary as the paymaster-general and then the accountant-general, who is like the internal auditor, who is there to make sure that there are checks and balances, so one is responsible for policy alone," he said.
Biti said the Act was clear that the minister of Finance is responsible for the formulation of macro-economic policy of the country hence the buck stops with him/her.
"The minister of Finance is one minister whose job description is in an Act of Parliament, other ministers are not. So you have a big responsibility. So in terms of managing the macro-economic of this country, Chinamasa failed. In fact, he was lucky just to be demoted. In a decent country, he probably would have spent time at Chikurubi. In former Eastern Republican countries, he would have been subjected to a firing squad and his biggest mistake was to understand the basic rules of economics, you cannot spend that which you do not have and only in mathematics does one minus two equal to minus one. In economics, one minus two - it can't," said Biti.
"If you don't have it, you can't spend. So right now we are in a huge mess, there is domestic debt right now at $6 billion. The budget deficit is over 10 percent of gross domestic product. This year, his mid-term policy disclosed that he already had a shortfall of $1,4 billion by June of 2017. My suspicion with this Command Agriculture, with elections, by the end of the year December 31, 2017, the shortfall would be around $3 billion. When your budget is $4 billion, you have a shortfall of $3 billion that means that you are basically 90 percent out."
To end the cash crisis, the former Finance minister suggested that Zimbabwe should dump bond notes and join the Rand Monetary Union (RMU), also known as the common monetary area, which links Namibia, Lesotho, and Swaziland to the rand in a de facto monetary union.
Though their currencies have different names, they are all pegged to the rand and so essentially fall under the South African Reserve Bank's monetary policy direction.
This has helped maintain financial and therefore also economic stability in these small countries but at the expense of considerable financial autonomy.
Said Biti: "If it were me, I would scrap the bond note today and then I would encourage everyone to have a point-of-sale machine; even people who are selling tomatoes along Fourth Street (Simon Muzenda Street), I would encourage them to have a point-of-sale machine, then, to migrate totally to a cashless society in the immediate short-term."
Biti said Zimbabwe can no longer continue to use the United States dollar as its anchor currency because it has no capacity to generate it in quantities that would mitigate the liquidity crisis.
For that reason, he said the country should consider joining the RMU.
"Because we have bastardised the US dollar, our solution now lies is joining the Rand Monetary Union and using the Rand as a currency. This means that we will not have any need for the Reserve Bank (of Zimbabwe)," he said.
"That also means that to protect people like you and me now, all balances that are sitting in our banks right now must be closed . . . They must be closed on a US dollar basis, so that when the government has money they will know you have US$36, you had US$100 000. To protect pensioners and workers, let's ring-fence current balances as US dollar balances," he added.
"So when we use the Rand now, it must not be mixed with our old US dollar balances, so we start afresh. That's why I said we need a revolution, we need a major paradigm shift and Zanu-PF is not capable of thinking the way I am suggesting now," Biti said.
Zimbabwe adopted a basket of currencies which included the US dollar, the British pound, Australian dollar, the South African rand and the Botswana pula as trading currencies in 2009 in a bid to dig the economy out of a decade long meltdown.
Government efforts to revive the economy have stalled since then, owing to lack of productivity and a persistent liquidity crunch blamed on the country's lack of credit-worthiness and economic policies blamed for scaring away potential investors.
In November last year, the central bank introduced bond notes, a surrogate currency, as an export incentive, trading at par with the US dollar.
Due to the liquidity crisis, the bond notes are losing ground to major international currencies thus reigniting debate on whether Zimbabwe should join the RMU.
Switching to the rand is seen boosting Zimbabwe's exports as the US dollar made its exports too expensive on international markets.
This could revive Zimbabwe's flagging manufacturing sector.
As the cash crisis continues unabated, the few US dollars that were in circulation have been wiped out with depositors sleeping in queues to access as little as $20 a day.
Before the introduction of bond notes, several demonstrations and court cases were launched in a bid to forestall their use.
When they were introduced, the bond notes were backed by a $200 million facility from Africa Export Import Bank.
The central bank recently said it will inject a further $300 million into the system to supplement the $200 million that it initially introduced, an aspect many have said will further affect the economy.
A lawyer by profession, Chinamasa took over from Biti - also a legal practitioner - four years ago after the ruling party romped to victory at the 2013 polls to end an uneasy unity government in which Zanu-PF shared power with the MDC.
The 60 year-old Zanu-PF politician had faced criticism ever since he took over from Biti - then a former secretary-general of the MDC - for failing to introduce sound economic policies that could attract foreign direct investment and improve people's livelihoods.
There has been speculation that Chinamasa might have been demoted from the Finance portfolio about a week ago and reassigned to a less fashionable ministry of Cyber Security, Threat Detection and Mitigation owing to his poor economic policies.
In a wide-ranging interview with the Daily News on Tuesday, Biti, who is now leading the People's Democratic Party, said Chinamasa was to blame for the current economic crisis because of his alleged failure to understand economics.
He said when Chinamasa took over from him in 2013 Treasury operated a functional system, which is no longer the case.
"I think that the person of Chinamasa must take a lot of responsibility," said Biti, who felt that in other countries, the former Finance minister could have either been jailed or put before a firing squad.
"As a minister of Finance, you have a huge blank cheque and the law says you drive policy. If you read Section 7 of the Public Finance Management Act, it says you - the Finance minister - are the treasurer. There are three (people) mentioned (in the Act); there is the minister, as treasurer, the permanent secretary as the paymaster-general and then the accountant-general, who is like the internal auditor, who is there to make sure that there are checks and balances, so one is responsible for policy alone," he said.
Biti said the Act was clear that the minister of Finance is responsible for the formulation of macro-economic policy of the country hence the buck stops with him/her.
"The minister of Finance is one minister whose job description is in an Act of Parliament, other ministers are not. So you have a big responsibility. So in terms of managing the macro-economic of this country, Chinamasa failed. In fact, he was lucky just to be demoted. In a decent country, he probably would have spent time at Chikurubi. In former Eastern Republican countries, he would have been subjected to a firing squad and his biggest mistake was to understand the basic rules of economics, you cannot spend that which you do not have and only in mathematics does one minus two equal to minus one. In economics, one minus two - it can't," said Biti.
"If you don't have it, you can't spend. So right now we are in a huge mess, there is domestic debt right now at $6 billion. The budget deficit is over 10 percent of gross domestic product. This year, his mid-term policy disclosed that he already had a shortfall of $1,4 billion by June of 2017. My suspicion with this Command Agriculture, with elections, by the end of the year December 31, 2017, the shortfall would be around $3 billion. When your budget is $4 billion, you have a shortfall of $3 billion that means that you are basically 90 percent out."
To end the cash crisis, the former Finance minister suggested that Zimbabwe should dump bond notes and join the Rand Monetary Union (RMU), also known as the common monetary area, which links Namibia, Lesotho, and Swaziland to the rand in a de facto monetary union.
Though their currencies have different names, they are all pegged to the rand and so essentially fall under the South African Reserve Bank's monetary policy direction.
This has helped maintain financial and therefore also economic stability in these small countries but at the expense of considerable financial autonomy.
Said Biti: "If it were me, I would scrap the bond note today and then I would encourage everyone to have a point-of-sale machine; even people who are selling tomatoes along Fourth Street (Simon Muzenda Street), I would encourage them to have a point-of-sale machine, then, to migrate totally to a cashless society in the immediate short-term."
For that reason, he said the country should consider joining the RMU.
"Because we have bastardised the US dollar, our solution now lies is joining the Rand Monetary Union and using the Rand as a currency. This means that we will not have any need for the Reserve Bank (of Zimbabwe)," he said.
"That also means that to protect people like you and me now, all balances that are sitting in our banks right now must be closed . . . They must be closed on a US dollar basis, so that when the government has money they will know you have US$36, you had US$100 000. To protect pensioners and workers, let's ring-fence current balances as US dollar balances," he added.
"So when we use the Rand now, it must not be mixed with our old US dollar balances, so we start afresh. That's why I said we need a revolution, we need a major paradigm shift and Zanu-PF is not capable of thinking the way I am suggesting now," Biti said.
Zimbabwe adopted a basket of currencies which included the US dollar, the British pound, Australian dollar, the South African rand and the Botswana pula as trading currencies in 2009 in a bid to dig the economy out of a decade long meltdown.
Government efforts to revive the economy have stalled since then, owing to lack of productivity and a persistent liquidity crunch blamed on the country's lack of credit-worthiness and economic policies blamed for scaring away potential investors.
In November last year, the central bank introduced bond notes, a surrogate currency, as an export incentive, trading at par with the US dollar.
Due to the liquidity crisis, the bond notes are losing ground to major international currencies thus reigniting debate on whether Zimbabwe should join the RMU.
Switching to the rand is seen boosting Zimbabwe's exports as the US dollar made its exports too expensive on international markets.
This could revive Zimbabwe's flagging manufacturing sector.
As the cash crisis continues unabated, the few US dollars that were in circulation have been wiped out with depositors sleeping in queues to access as little as $20 a day.
Before the introduction of bond notes, several demonstrations and court cases were launched in a bid to forestall their use.
When they were introduced, the bond notes were backed by a $200 million facility from Africa Export Import Bank.
The central bank recently said it will inject a further $300 million into the system to supplement the $200 million that it initially introduced, an aspect many have said will further affect the economy.
Source - Daily News
