Speculation behind chaos in economy – Mthuli Ncube

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By Staff Reporter

SPECULATIVE financial practices are behind the mayhem in the economy and government is working hard to stabilise things, Finance Minister Mthuli Ncube has said.

Ncube told captains of industry at the ongoing Zimbabwe International Trade Fair in Bulawayo, Wednesday that government will not be careless to resort to printing of money.

“We are doing very well on the fiscal front . . . Government is solvent, we are running surpluses and we have been doing average surpluses of RTGS$100 million since September last year when we came in. In January we had surplus of RTGS$102 million, February RTGS$85,5 million as we had to take into account cushioning of civil servants. In March, our surplus doubled to be just about RTGS$200 million,” Ncube said.

Critics have however, argued that the surpluses that Ncube has been bragging about have not resulted in tangiable benefits to the economy.

Despite valiant efforts from government to stem the tide of rampaging inflation, the exchange rate between the local currency and the US dollar continues to rise triggering price hikes of basic commodities. But Ncube argued the speculation was behind this.

“Where is pressure on the exchange rate coming from? Before we knew that it came from the fiscus, we were monetising the fiscal deficit and then money supply would grow, but now where is the pressure coming from?

“Clearly it is speculation and that speculation is not a good idea, we know who is driving it. Our job as Government is to make sure that our fundamentals that determine value of a currency are still strong,” the Treasury chief said.

Since the official introduction of the new currency in February at US$1: RTGS$2.50 the exchange rate has gone up to over RTGS$3.90 for the greenback. However, the situation has been worse on the parallel market where the US$ is fetching nearly RTGS$5.

Ncube insisted government will not be careless to push money supply through printing.

“We are not careless in terms of how we spend and we make sure the value of the currency is preserved, but you (businesses) should meet us halfway,” he said.

With government having officially announced a period of austerity measures, Ncube argued this will only be sustainable for no more than a year.

“We need to go through some period of austerity as we build towards prosperity. But quite clearly you can’t do austerity for three years, that’s bad, do it one year and move on,” said the Finance Minister.

Government has been fretting over the current spate of price increases amid fears of social upheaval and Ncube unlike Vice President Chiwenga who came out guns blazing with warnings, pleaded for rationality.

“Please, it is bad economics, very bad economics where you tie price increases directly to the exchange rate. Good economics says tie prices around a consumption basket, you don’t earn your salary to go and buy US dollars. So, inflation thinking should be hinged around consumption basket and not US dollars,” he said.

“Above all, make use of this interbank bank market, we have created it for you.