Friday, November 28, 2008

Gono seeks to reduce Zimbabwe inflation

Gono seeks to reduce Zimbabwe inflation
Written by Kingsley Kaswende in Harare
Friday, November 28, 2008 10:20:42 AM

RESERVE Bank of Zimbabwe (RBZ) governor Dr Gideon Gono has said he will now concentrate on reducing the world’s highest inflation to a single digit by ceasing all quasi-fiscal operations.

The Zimbabwe Central Statistical Office, whose latest inflation figures are those of July 2008, pegs inflation at 231 million per cent, but the Cato Institute pegs it at 89.7 sextillion per cent [89.7 followed by 21 zeros] as at November 14, 2008.

Dr Gono, whose mandate was renewed for another five years a couple of days ago by President Robert Mugabe, said he would dedicate his fresh term to the central bank’s core business of controlling inflation and stabilising financial markets.

He stressed that a tight monetary policy stance would be anchored on a comprehensive realignment and streamlining of the central bank’s functions in a manner that would leave the bank with core responsibilities of lowering the world’s highest inflation to a single digit.

“...All the Bank’s quasi-fiscal outlays since 1 December, 2003 have been fully amortized such that there will be absolutely no penny to be transferred as a burden on the fiscus, and hence the taxpayers. With effect from January, 2009, therefore, the Reserve Bank will be focusing on the core businesses of inflation control and financial sector stability,” Dr Gono said, in accepting his re-appointment.

“Under this vision, turnaround of the economy entails us collectively ensuring that within the next five years, we secure an economy characterized by the following key factors, among several other imperatives: low and stable single-digit inflation, anchoring a stable and predictable business environment as well as protecting the welfare of workers and the generality of Zimbabweans.”
He assured his critics that he would succeed in his mission.

“To those who do not see beyond their noses; and to those who do not have faith in the power of dedicated intentions, our current circumstances may seem too daunting to overcome.

But as Governor, I have no doubt in my mind that a combination of comprehensive macroeconomic policies, discipline, a shared vision and hard work all-round will see us achieving the outcome of a better and prosperous economy over the not too distant future,” he said.

Dr Gono had thrown himself into the line of fire by the International Monetary Fund (IMF) and the country’s opposition party for fuelling hyperinflation by printing large sums of money to fund quasi-fiscal operations.

Over the past five years, the Reserve Bank has been involved in funding quasi-fiscal operations through programmes such as the Parastatal and Local Authorities Re-orientation Programme.

Dr Gono was on several occasions criticised for encroaching into activities, which were not under the central bank’s mandate, and for relegating the Ministry of Finance’s activities.

However, he argued that those were ordinary steps meant to address extraordinary circumstances and realities on ground.

“The quasi-fiscal operations were deployed as survival interventions in the national interest,” he said, adding that parastatals, local authorities, ministries and government departments would now be fulfilling their statutory mandates without the assistance of the central bank.

Dr Gono said an independent developmental institution would be put in place to manage the outstanding quasi-fiscal programmes.

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