Government suspends payment to suppliers

Government suspends payment to suppliers

Nevanji Munyaradzi Chiondegwa

Permanent Secretary George Guvamatanga of Ministry of Finance and Economic Development has informed Ministries and Government departments that Treasury is suspending payments to all government suppliers.
Mr Guvamatanga wrote the letter in line with the Public Finance Management Act [Chapter 22:19] which empowers Treasury to manage and control public resources, as well as determine the manner in which public resources are utilised.
The suspension runs until an investigation into what the Ministry of Finance thinks is a racket by suppliers to inflate prices by invoicing at the parallel market exchange rate has been completed.
In his letter, to other Permanent Secretaries, Mr Guvamatanga said, “Reference is made to the above subject matter.
Treasury has noted with concern that line Ministries, Departments and Agencies (MDAs) are submitting pay runs for the disbursement of cash for good and services procured using parallel market exchange rates.”
He said that such pricing framework by the suppliers of goods and services, have not only been causing inflationary pressures but also fuelling parallel market activities.
This has resultantly caused instability in the foreign exchange market characterised by unnecessary movements on the rate resulting in exorbitant prices being charged.
He further said, “Furthermore, this has also resulted in the erosion of MDAs appropriated Budgets and hence, exerting pressure on Treasury in demanding more fiscal resources which are not aligned to the revenues inflows, thereby creating an inherent fiscal risk of unsustainable budget overruns and budget deficits.”
He said that MDAs are being directed to rationalise their payment requests with a view to operating within the confines of the willing buyer willing seller foreign exchange rate.
Mr Guvamatanga said, “In this regard, Treasury is immediately suspending all payments to MDAs whilst awaiting your submission of reports of findings of the due diligence exercise on all running and future contracts with special focus on pricing. Going forward, you are required to seek Treasury approval on contract prices in order to ensure effective control in the utilisation of public resources as guided by the PFM Act.”
He also said, “In addition, all payment runs submitted to Treasury should have been reviewed and signed off by the Accounting Officer ensuring value for money in procurement and confirming that the pricing framework in line with Government policy.”
According to sources, there are measures being put in place to ensure money paid to service providers by Government does not end up fueling the black market.