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(TALKZIMBABWE) Zimbabwe Budget 2009: Govt scraps forex controls

Zimbabwe Budget 2009: Govt scraps forex controls
AP/Reuters/DPA/TZG
Thu, 29 Jan 2009 17:31:00 +0000
Acting Finance Minister, Patrick Chinamasa

The Government of Zimbabwe has scrapped foreign currency controls to allow business transactions to be conducted in U.S. dollars and bank notes of neighboring countries, in a move to cushion individuals and businesses against the effects of hyperinflation and promote expansion in the economy.

Price controls are scrapped with immediate effect, because of their “unintended consequences” of putting companies out of business, creating massive shortages and exacerbating hyperinflation.

The news was announced by Acting Minister of Finance Patrick Chinamasa during the presentation of the National Budget on Thursday.

"In the hyper-inflationary environment characterizing the economy, our people are now using multiple currencies alongside the Zimbabwean dollar. These include the (South African) rand, U.S. dollar, Botswana pula, euro and British pound among others,“ Chinamasa said in the Budget speech.

Previously, only licensed businesses could trade in forex, but nearly all transactions in Zimbabwe are now conducted in U.S. dollars, U.K. pounds, the South African rand and Botswana pulas.

For the first time, the Budgets of State expenditure were given in Zimbabwe dollars, US dollars and South African Rand. Detailed government expenditure for last year, was given in Zimbabwe dollars.

The total proposed Budget was estimated at US$1.98 billion with US$149.49 million allocated to the education sector and US$157.8 million allocated to the health sector — where critical funding is needed urgently.

Tariffs paid by residents in urban areas will be increased and denominated in US dollars. VAT will be charged in forex on goods imported from outside the country and customs duties (carbon tax, fuel tax, etc.) will be charged in forex. Duty on beer, cigarettes, and second hand cars will also be paid in forex.

Zimbabwe's gross domestic product was projected at $5.5 billion (approximately 3.9 billion pounds).

Chinamasa said civil servants will continue to be paid in local currency, but that their salaries will be brought in line with inflation. They also will be paid a monthly allowance in foreign currency through a voucher system.

He said the vouchers were “an interim arrangement” and will be phased out gradually and replaced with foreign cash “in line with the improvement in foreign currency inflows.”

Chinamasa also announced that price controls by Government will be removed effective Sunday, February 1, 2009.

The stock exchange will be allowed to deal in any currency, and insurance companies, local authorities, state-owned utilities and high schools will be allowed to charge fees and levies in both Zimbabwe and hard currencies. A range of taxes will also be charged in foreign currency.

The Acting Finance Minister who is also the principal Zanu PF negotiator in the ongoing all-party talks, also urged the rival political parties to endorse and implement the transitional Global Political Agreement. He said that “it requires a paradigm shift in terms of acknowledging the reality that we cannot eat what we do not have.”

Chinamasa also announced the end of a monopoly on the country's grain trade by the Grain Marketing Board and said with immediate effect milling companies could trade openly with farmers.

Chinamasa said the Reserve Bank of Zimbabwe will “concentrate on its mandated policy by ensuring the stability of the financial sector.”

AP/Reuters/DPA/TZG

Labels: 2009 BUDGET, NEOCOLONIALISM, PATRICK CHINAMASA

posted by MrK @ 7:36 PM