‘Government paying rational invoices’
Nevanji Munyaradzi Chiondegwa
Contrary to claims by various stakeholders including the Confederation of Zimbabwe Industries (CZI), Government says it has been paying for goods and services supplied to Government Ministries, Departments and Agencies.
This was revealed by Finance and Economic Development, Professor Mthuli Ncube yesterday when he was announcing the measures taken by Government to arrest inflation, restore macroeconomic stability and improve stability.
This came after the realisation that it was Government, Ministries, Departments and Agencies who were fuelling price instability and inflation through their procurement policies which did not focus on value for money.
Professor Ncube revealed that in the last six weeks since the announcement of the measure to contain rampant inflation, and arrest price instability, Government has paid a total of ZWL184 billion dollars to suppliers.
This debunks claims by ‘economists’ who were assuming that the current stability is a product of non-payment of Government obligations.
Professor Ncube said; “The Government of Zimbabwe remains committed to maintaining macro-economic stability and the elimination of harmful and destabilizing arbitrage conditions that have pervaded the economy at the expense of the generality of citizens. The suspension of all payments to on contracts that are clearly based on speculative forward exchange rates has seen a rapid correction in the market with the official exchange rates on the auction and the WBWS exchange rates in the banks converging between ZWL605/ 1 USD to ZWL660 /1USD.”
The correction has been supported by a significant and observed retreat of the unofficial exchange rates to levels below ZWL700/1 USD.
Whilst Government supply contracts have been undergoing a validation exercise, we have continued to pay up on those that meet the Value for Money criteria.
Professor Ncube said, “As we move ahead to implement the Value for Money process, we are committed to honouring all our obligations provided that they are priced correctly in the public interest and such payments will not adversely impact the exchange rate and cause inflation.”
This puts paid to claims by CZI president Kurai Matsheza who had said said while prevailing stability was welcome, it had come at a huge cost to businesses.
Mr Matsheza had said. “The stability we wanted; but it has come at a huge cost to business, it is creating other problems. Obviously, the exchange rate developments and inflation; month on month (inflation) is coming down; it is a welcome development, but it’s the cost of achieving that.”
The CZI president had added that the measures are threatening aggregate demand, with factories not able to really borrow because of the high interest rates.
He further said that if things carry on this way, production volumes will significantly come down.
“We hope the authorities will do other things to make sure (the situation improves). We want the Government to start spending again so that it can oil businesses and to create liquidity in the market,” Matsheza said.
Asked whether, as business leaders, they were not worried that if the Government resumed spending to previous levels this would reawaken “the demons’ that stoked exchange rate and inflation rampage, which negatively impacted the economy, Matsheza said
“Government spending will not create that problem, it depends how they are spending; where do they get the money to spend. If they are spending the money they are getting from taxes; that is money supply neutral.
But with the stability that has been coming in for the past couple of weeks, we think our pricing will also become stable, as the rates (official and parallel exchange market rates) appear (to) be converging,” Matsheza added.
Economist professor Gift Mugano shared similar sentiments as Matsheza saying, “The moment the Government stops spending, you expect economic contraction. The minister of finance will not be able to guarantee even the revised growth rate target of 4,5 percent. He will find himself lower than that.”
He further said “We can’t survive this, to be honest because, as much as I agree that the Government is right in putting scrutiny on Government procurement processes, what needs to be done is that we need to do this conservatively, (otherwise) these companies will collapse. There is a contagion effect; it’s also going to affect service delivery because contractors and even service providers will collapse and whatever is happening, economically, will just collapse.”
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