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Minister Ncube you are printing Z$ 400 m to pay for increased expenditure = financial indiscipline. Simple!

03 Jul 2019 at 07:37hrs | Views
"ZIMBABWE will print ZWL$400 million bond notes which it says will be drip-fed into the economy to cover the gap left after government banned the use of multi-currencies in local transactions," reported Bulawayo 24.

"Statutory Instrument (SI) 142 (2019) has removed the multi-currency system (US dollar and rand) and there is a gap in terms of paper money and there is a difference between paper money and currency in that currency is the ZWL$ represented by bond notes, coins and RTGS$," said RBZ Governor Dr John Mangudya.

"By printing the ZWL$400 million, we are saying there is need for increase in paper money to replace the gap created by non-usage of foreign currency and we are saying the ZWL$400 million will be on a drip-feed basis. And as we print new money, it will also replace the old dirty notes."

Drip-feed, yeah right!

SI 142 has cleared the way for this Zanu PF government to solve its immediate problem of meeting the teachers, nurses, soldiers and the rest of the bloated civil service's demand for wage increase. Up to now the regime had met the wage increase demands by increasing the supply of the local currency; a move that has only fuelled pressure for the local currency to lose its value relative to the foreign currency. It was therefore no surprise that the teachers, nurses, etc. were now demanding that their wages must be paid in the more stable US$.

Two weeks ago government asked nurses to call off their plan to go on strike to press their demand for a wage review and that it must be paid in US$. SI 142 has banished the use of US$ has legal tender and thus government will not have to worry about finding the US$ to pay its workers. Government will now go ahead and award the workers wage increases way about its increased collected revenue.

Where, you might ask, will government get the extra money to pay the workers?

Answer: conjure it out of thin air - print it!

Bulawayo Central MDC Alliance MP, Nicola Watson, was not so easily fooled and asked if the printing of more bond notes would not result in the financial indiscipline, spiralling inflation and economic decay of 2008 era.

"In 2008, we had fiscal indiscipline and we are far from that as our policies and conditions are different and I do not think we are repeating the same thing. We are in a far better position than then. I would like to assure you that we are not in 2008 where we had a number of zeroes compared to now. It is about policies and we are in a different policy environment," replied Minister of Finance, Professor Mthuli Ncube.

Professor Mthuli Ncube we are talking about simple arithmetic here and not rocket science! Government is set to increase the wages of civil servants by say 10% (we will know the exact amount in the next week or so). We also know that government has no hope of earning the extra revenue to pay for the wage increase. Indeed, if anything government revenue has been shrinking given the drought, the cyclone, power cuts, etc., etc.

Minister Ncube, you are printing Z$ 400 million to pay for increased expenditure = financial indiscipline. Simple!

Of course, Zimbabwe is back to the nightmare years of hyperinflation and SI 142 has taken away the people's right to be paid and to use stable foreign currencies, the only restraining force stopping the regime printing money to solve all its monetary problems. The newly printed Z$ 400 million drip feed is meant to last a year but lasts a month, then a week, etc.; it is all drip-feed, still.

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