Thursday, July 28, 2011
Thursday, 28 July 2011 02:00
By Ruramai Gatsi
FINANCE Minister Tendai Biti says Government will continue using the multiple-currency system while addressing emerging challenges related to the shortage of change and small denominations.
"However, it is also apparent that the economy, although on a recovery path, remains fragile with a lot of challenges and serious weaknesses related to fiscal space, investment, indebtedness, balance of payments and reserves, among others."
He said the Government would continue to facilitate debate on the issue of currency reform.
"There is anxiety, particularly within the business sector, on the future course of Government with regards to the foreign currency regime," he said..
"This also follows Government pronouncements in previous Budget statements for a review of the currency system at the end of STERP II in 2012.
"Government will continue to facilitate debate on the issue of currency reform being guided by regional integration objectives, specifically those related to the formation of the Sadc Common Monetary Area by 2018."
Minister Biti said the review of the currency system was to be guided by attainment of certain macro-economic milestones.
This included the evidence of a sound track record of policy consistency and implementation, a fairly stable and strong economy characterised by a sustainable external position, a strong financial sector and overall confidence in the economy.
He said empirical evidence shows that there is economic stabilisation as a result of the adoption of the multiple currencies.
"Other benefits realised include immediate containment of inflation by arresting rapid price movements, creation of scope for medium- to long-term planning for businesses and individuals, restoration of the banking sector's financial intermediation role and a gradual building of confidence in the economy," he said.
He highlighted the need to continue with the multiple currency system in the medium term in order to allow consolidation of the prevailing fragile macro-economic environment and building of the necessary confidence for the ongoing economic recovery efforts.
These recommendations are also consistent with the agreed assumptions and objectives of the recently launched Medium Term Plan 2011-2015.
The minister also expressed concern over the shortage of smaller denominated coins.
He said in the 2011 Budget, Government undertook to facilitate the acquisition of smaller denominated coins to alleviate difficulties being faced by the public.
"Efforts to import small dollar coins to ease the small change problem are continuing, with the Bankers' Association of Zimbabwe now spearheading the process in liaison with US financial authorities.
"It is envisaged that the coins will be availed before the end of the year," he said.
The shortage of coins has created distortion in pricing and buying of goods in the country.
The retail sector has capitalised on the shortage of coins and in most cases the public is forced to buy unwanted commodities - among them sweets, biscuits and other smaller items - for change or to take vouchers, redeemable only at that particular shop.