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‘Ncube measures meant to raise money for elections, can’t save ZWL’

Measures to stabilise the economy announced by Finance Minister Mthuli Ncube on Monday will, according to economic analyst Tinashe Murapata, not save the Zimbabwean dollar but they are just meant to raise money for elections under Treasury and not the Reserve Bank of Zimbabwe (RBZ).

Ncube announced a new series of measures to stabilise the deteriorating economic and financial situation in Zimbabwe.

The new policies include that all Government agencies, including parastatals, will now collect fees in local currency.

 Government rather than the Reserve Bank will buy the 25 percent of foreign currency exporters are required to surrender, the auctions will be limited to US$5 million a week, and all retained export earnings unspent after 90 days will be liquidated in the interbank market.

Some of the measures will come into effect on 1 June 2023.

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Tinashe Murapata, is an economist and microfinancier who is a frequent commentator on economic policy
Tinashe Murapata, is an economist and microfinancier who is a frequent commentator on economic policy

But Murapata argues that the latest measures expose a rift between the central bank and Treasury with the latter seemingly accusing the former of printing money. He described it as a “turf war”

“In the ever growing and now public spat between Monetary Authorities and Treasury it looks like Treasury has won. For now. At least on paper,” Murapata said in his analysis of the latest measures announced by Ncube.

“The Treasury statement on Policy measures to stabilize the economy, reveals how export surrender have been funding government expenditure. Not that the market wasn’t aware of it. But in the ensuing turf wars the Treasury has revealed how RBZ was printing ZWL to pay exporters.

“This money taken at 50% discount to the market is what has been funding the government of Zimbabwe dollar payments. Industry was forced to source its own currency while the treasury got money directly from exporters.”

He said that the new directives will see exporters doubly taxed at the highest marginal rate in the world.

“Make no mistake about it, the Treasury will not pay the going rate for its currency. The 50% discount will prevail. To make matters worse, exporters are not allowed to pay the government in the ZWL they receive. They make direct losses on it and suffer hyperinflation tax on it.

“Imagine South African exporters being given rands for their export receipts at a 50% discount and then not allowed to use those rands to make government payments? Instead, TB’s at 18% coupon when inflation is above 700%.”

He added: “Treasury has very little fiscal space. In 2022 Zimra collected US$4,8 billion using the official exchange rate or US$3,5 billion in real terms. This is huge. Given the size of our economy. And ordinarily should be enough.

“But in real terms we have calculated that the government of Zimbabwe spends double the real amount. That is US$7 billion. What Uganda, an economy more than double Zimbabwe spends.”

As intimated by our guests on Friday drinks, ordinarily this US$3,5 billion gap must be funded through domestic savings or international credit. Unfortunately, Zimbabweans and the international community don’t trust the government of Zimbabwe. So they resort to printing.

“Pfumvudza, under the government’s most successful’ ministry, claims to provide inputs to 3.5million households, when government of Zimbabwe’s own statistical office only has 3,8 million households in the entire country.

“Either there is waste on a grand scale or corruption. Or both. While the numbers don’t add up, the taxpayer or exporter must fund this profligacy.”

Murapata said the decision by the Minister to take over the role of RBZ “doesn’t solve the underlying problem. In fact, in many ways it makes it worse. For whatever reason Afreximbank trusted RBZ. They don’t trust Treasury.

“Money supply increased by 1000% in the last twelve months. That money will still feed spiraling prices for the foreseeable future.”

He added that the new policies would not empower the Zimbabwean dollar but were meant to raise money for elections.

“These measures cannot save the ZWL. They’re meant to raise money for elections under the treasury and not the central bank. Three months before an election, this is worrisome.

“Government raising money through TB’s means it must increase the coupon rate. It must be market determined. Why go through that effort when there are free export dollars. After all it’s not the ZWL they’re after.

“Treasury wants to liquidate exporters funds not utilized by exporters. Here, the Professor wants part of the US$1bn in deposits in our financial system. Use it or lose it, is a policy that undermines the credibility of the system itself.

“Worth remembering Zimbabwe borrowed US$1bn offshore last year and imported US$8.6bn. If companies lose their dollar savings to nonexistent households under pfumvudza what exactly is Prof promoting?

“Under official dual currency, firms and citizens can keep money in whichever currency. However, the fiscus is under pressure hence the use it or lose it policy.”

Murapata accused Ncube of being afraid of cutting expenditure even that which cuts corruption.

“He can’t as yet confront the president on cutting expenditure.

“Dr (RBZ governor John Mangudya) Mangudya does not act on his own frolic. Yes, he was a gymnast, but his acrobatics were at the service of GOZ. He can even claim to have raised US$1.8bn from Afreximbank. What can Prof Mthuli claim?

“Prof Mthuli is showing a lot of false bravado, knowing fully well the printing will not stop.

“This was purely turf wars. Unless GOZ cuts expenditure, expect the chaos to continue.” Murapata added.