• Mon. Apr 15th, 2024

Finmin says spending will be along budget lines in coming elections

ByEconomic Times

Feb 10, 2023

…as liquidity management committee now operational

By ETimes

Zimbabwe has set up a liquidity management committee, says Finance deputy minister Clemence Chiduwa, while emphasising that there will be no high government spending in the run-up to elections in the middle of the year.

There are fears that the 2023 elections might result in policy disruptions and continued local currency depreciation against the US dollar.

Chiduwa told a Confederation of Zimbabwe Industries economic outlook symposium that the liquidity management committee will assist in terms of managing the liquidity that is in the market.

“Towards the end of last year, in November and December, we ended up flooding the market with Zimbabwe dollars. It happened because we were paying farmers and contractors,” he said.

“We have a situation where the government is crowding out the private sector and what we are saying is that the private sector should come together and play its role.”

Of late, government procurement has allegedly been driving market liquidity.

“Yes, but we have also come up with a policy to ensure that whenever we make huge payments at the same time, we are also going to unleash our open market operations,” he said.

“This will make sure that if we are going to release $40 billion next week, our open market operations will also be in the market at the same time so that we mop up any excess liquidity.”

He admitted that from late last year up until the beginning of January this year, there was quite a lot of cash in the market.

“From the 5th of January up until now, I think you can check that there are no Zimbabwe dollars in the market,” Chiduwa said.

“The rate, yes, went up to US$1: ZWL1000, but at the moment the realistic black market rate, which is there, is around US$1: ZWL950.”

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The Zimbabwe dollar continues to lose ground against the US dollar at the Reserve Bank of Zimbabwe’s weekly foreign currency auction, with the latest on Tuesday seeing it shed 3.63%. The local unit depreciated from 801.6023 to 831.8147 per US dollar.

The southern African country has a subsidy policy, but Chiduwa said it can only embrace a subsidy where it is needed and budgeted for.

“Some people have said we are going towards the election, probably because of the election, and we are going to just spend,” he said.

“It is not going to happen; what we have done as Treasury and Government is to ensure that we adhere to the budget lines as presented in the national budget.”

The subsidy policy focuses on productive sectors of the economy and other social interventions, he added – Harare

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