ACTING Finance minister Patrick Chinamasa yesterday clipped Reserve Bank Governor Gideon Gono’s wings by ordering the central bank to concentrate on its mandate to ensure the stability of prices and the financial sector.
In his 2009 national Budget presentation in parliament, Chinamasa also reassigned the Goodwills Masimirembwa-chaired National Incomes and Pricing Commission (NIPC) to only monitor and not set prices for goods and services.
Chinamasa said inflation had spiralled out of control because the Reserve Bank had been printing a lot of “unbudgeted money”.
“Excessive money supply growth rates, emanating from unbudgeted expenditures made through the Reserve Bank, as well as low supply of goods and services remain the major source of inflation,” the minister said.
Inflation was at 619,50% when Gono was appointed governor in November 2003.
Â Official inflation as of June last year was at 231 million percent although independent analysts said the figure was now above one billion.
Money supply was 350% when Gono took over from Leonard Tsumba.
Analysts, however, said money supply could no longer be calculated because of excess money printing as evidenced by the failure of the bank to release the figure since April last year.
Since January last year, Gono has printed 35 new money notes.
Chinamasa said instead of printing unbudgeted money, the country should focus on policies which stimulate production.
“The 2009 budget thrust should shift from policies that promote and fuel consumption to those which create wealth through supporting our productive sectors particularly agriculture mining, tourism and manufacturing whose capacity utilisation is now below 30%,” said Chinamasa.
“The (Reserve) Bank’s balance sheet is now free of these quasi-fiscal expenditures and the Reserve Bank will now concentrate on its major mandate of assuring the stability of prices and the financial sector,” said Chinamasa.
He also said the domestic price regime had been liberalised to remove restrictive price controls.
“The role of the National Incomes and Pricing Commission has thus been reviewed to focus on monitoring price trends obtaining in the sub-region and beyond, guiding producers and retailers as well as advising government on import parity based pricing,” said Chinamasa.
This means NIPC will no longer have the authority to control prices but monitor them only.
The relevance of the NIPC had been questioned by a lot of producers and retailers who said it was not effective because policies and prices it imposed were not followed.
Chinamasa said the Reserve Bank was reviewing support to the mining sector allowing for easier access to foreign exchange and thereby supporting recapitalisation, purchase of inputs and provision of working capital.
“Furthermore foreign currency sales to the Reserve Bank will be at a market-determined exchange rate,” he said. “Government, through the Reserve Bank will also facilitate negotiations for external financial facilities by mines including gold on the back of future production.”
Documents in possession of businessdiget show that gold miners on January 15 submitted several proposals to the interim Mines minister Sydney Sekeramayi seeking his intervention to save the former leading foreign exchange earner from collapse.
Virtually all gold mines across the country have suspended operations owing to cash flow problems.
The miners’ proposals follow a series of attempts by the cash-strapped industry to engage authorities over the unpaid US$30 million by the Reserve Bank.
Chinamasa’s US$1,9 billion budget, which will be finance through taxes, would not have a deficit.
In November 2007, the then Minister of Finance, Samuel Mumbengegwi, announced a $7,800 quadrillion budget for 2008, which saw the budget deficit then rising to 11% of the Gross Domestic Product.
Chinamasa said the government would pay allowance to its workers in foreign currency because remunerating them in local currency alone when the domestic goods and services market had been liberalised to allow for multiple currency pricing, would disempower employees.
He said: “In this regard, government proposes a remuneration framework for all public servants which provides for payment of salaries in local currency, with periodic reviews in line with cost of living developments, payment of a monthly foreign currency allowance, to facilitate access to a basket of goods and services now being charged in convertible foreign currencies.”
As reported by the Independent last week, the foreign currency allowance would initially be through a voucher system pegged to a basket of basic goods for a family of six.
“The voucher system is an interim arrangement, and will be phased out gradually in favour of payments through the banking system in line with improvements in foreign exchange inflows,” Chinamasa said.
BY PAUL NYAKAZEYA