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(HERALD) Treasury in Zimdollar exchange dilemma

Treasury in Zimdollar exchange dilemma
Friday, 30 September 2011 02:00
Zvamaida Murwira Senior Reporter

TREASURY is still to determine the exchange rate to use in settling payment of Zimbabwean dollar account holders following the Government's decision to demonitise the local unit, Finance Minister Tendai Biti has said.

He said Treasury was facing a dilemma to come up with a formula to use in determining payment since there were four exchange rates in use during the Zimbabwe dollar era.
The minister was responding to questions from journalists at the launch of the 2012 Budget rollout plan.

He said during the Zimbabwe dollar era there was the cash rate, Real Time Gross Settlement Rate, parallel market rate and the official exchange rate.

Government was, therefore in a quandary as to where the use of the official exchange rate would see Treasury faced with a bill amounting to billions of US dollars while relying on the parallel market would amount to legitimising something illegal.

"That's the dilemma we are facing," he said. "It's an operational issue: we are committed to demonitisation," said Minister Biti.

In his Mid-Term Fiscal Policy Statement in July, Minister Biti estimated that the demonetisation exercise would cost about US$6 million.

"This amount will need to be provided for through the Budget. A committee comprising officials from Government and the Bankers' Association of Zimbabwe is currently working on the requisite details and modalities to operationalise the process," he said.

Turning to the 2012 National Budget, Minister Biti said it would be predicated on fundamental macroeconomic instruments.

He said the budget intends to achieve economic growth and job creation and would be premised on pragmatism. The rollout plan meant his ministry would now embark on a series of extensive consultative meetings with stakeholders throughout the country.

Minister Biti said he would present the 2012 strategy paper in Parliament next Tuesday.

The paper is aimed at giving the fiscal framework and guide Government departments and reduce expectations "so that we don't dream".

"The budget will be underpinned by realism and pragmatism, the pragmatism that we have a narrow fiscal space - we have to live within our means and cut our cloth to size," he said.

Non-discretional expenses, such as salaries, would constitute the bulk of the budget, leaving "a small window" for discretionaryexpenditure such as water and other social services.

He said the economy had been "hamstrung" by the failure to implement agreed programmes concluded either at Cabinet or committee level.

"There is kwashiorkor of common vision," he said. "The slow pace of reforms and implementation of agreed programmes . . . the crisis at Air Zimbabwe and at the Grain Marketing Board are indicative of the slow pace of reforms."

Turning to the 2011 National Budget performance, Minister Biti said while he remained optimistic that the country would achieve its growth and revenue targets, he was worried at how Government departments were spending their money.

He said travelling alone had gobbled about US$40 million since the beginning of the year, something he said was "unsustainable".

"Our travelling expenditure of US$40 million is pathetic, considering that we owe farmers US$35 million," he said.

Labels: TENDAI BITI, ZIMBABWE DOLLAR

posted by MrK @ 5:24 PM