eBusiness Weekly
HARARE – The Zimbabwe government is yet to decide which currency it will adopt for primary use when it implements currency reforms in the economy, Finance and Economic Development Minister Professor Mthuli Ncube said on Wednesday.
Upon appointment into Cabinet in September, Professor Ncube said he would prioritise currency reforms which would entail either removing the bond note from circulation and adopting the US dollar only or adopting the South African Rand or re-introducing a Zimbabwean dollar backed by adequate foreign currency reserves and macro-economic stability.
“I would like to implement this by year-end,” he was quoted saying in a local newspaper then.
Zimbabwe adopted use of multi-currencies, primarily the United States dollar in 2009, but has been experiencing cash shortages which authorities blame on externalisation and hoarding.
But, Professor Ncube told journalists that government was still weighing its options regarding which route to take.
“We have always said there are many options that Zimbabwe could follow in the future and we are evaluating every option. There is no preferred option that I can pronounce today,” he said.
“But there are certain principles that we want to adopt when (we agree on) whatever option we adopt which should be the least costly route for the citizenry (and) for the economy in terms of pressure on reserves.
“Whatever route we take it should be the least costly route but also the most sustainable going forward, the one that will also reduce potential for volatility in future.”
Prof Ncube added: “Those are the issues to take into account when one is choosing the option to adopt but we have not chosen any option as yet, the only option as for now is deal with the fundamentals and we are dealing with them.”
He said in the build up to currency reforms, treasury was working on getting the macro-economic fundamentals right , reducing the budget and current account deficits, improving money supply and winding up negotiations with creditors on arrears repayment.
“All those are the architecture of putting together a foundation for currency reform,” he said.
“We have balanced the budget deficit in the month of September and in the month of October, in fact in the month of October we have a primary surplus of $29 million, this is the first time it has happened in a long while.
“The budget is as good as balanced; we are walking the talk when it comes to fiscal discipline, fiscal consolidation and balancing the budget because that is a key driver of the value of a currency.”
On austerity measures proposed by the 2019 budget, Professor Ncube said the country’s leaders were leading from the front by taking a five percent cut in their salaries.
“On cost containment, His Excellency President Emmerson Mnangagwa is leading from the front on this issue, he decided he will cut his own salary by five percent and the Vice Presidents did the same, we as Ministers and deputy ministers did the same, the permanent secretaries up to principal directors, heads of parastatals and the directors also did the same. So this is leadership from the front in terms of cost-containment. That sets the tone for the cost containment issue around the wage bill,” he said.
In his budget statement last week, themed austerity for prosperity, Professor Ncube introduced a raft of cost cutting measures to breathe life into the country’s ailing economy.
These included reducing the number of foreign diplomatic missions from 46 to 38 and enforcing the retirement policy for civil servants who had reached the mandatory retirement age of 65 but were still on the government pay roll.
Wages in the civil service take up to 90 percent of Zimbabwe’s national budget, leaving little for investment in key public infrastructure such as roads, power stations and health facilities.
To make matters worse, government finances a large part of this by borrowing on the local capital markets, crowding out the productive sectors from critical financing. – New Ziana
