Govt doubles down on anchoring stability
GOVERNMENT says it remains committed to maintaining macro-economic stability and eliminating arbitrage opportunities in order to create sustainable conditions for economic growth.
A cocktail of fiscal and monetary measures were recently introduced to restore macro-economic stability, boost confidence, increase appeal of the local currency and deal with market indiscipline.
Parallel market exchange rates and prices of goods and services have been stable for several weeks.
Government has since indicated that it is prepared to introduce additional measures to anchor economic stability.
Economist Mr Clemence Machadu said the latest interventions to vet public procurement contracts to curb speculative and inflated pricing would likely foster discipline in the market since Government is the biggest procurer.
“If suppliers are compelled to put their houses in order and guided by best practices, it can go a long way in weeding out speculative tendencies and ensuring efficacy in revenue utilisation,” he said.
“It is also my view that those tasked with this crucial role should also be value for money themselves, and theirs should be a two-way street role of reviewing contractors and also those who award inflated bids, too.”
In a statement last week, Finance and Economic Development Minister Professor Mthuli Ncube said authorities would relentlessly push to achieve sustainable and enduring macro-economic stability.
“Additional comprehensive measures to further strengthen procurement systems and to improve management of payment cycles for Government contracts are therefore an urgent imperative,” he said.
Treasury recently suspended payments to contractors after noticing that they were submitting invoices
for goods and services priced using parallel market rates.
Ministries, department and agencies are now required to seek approval from Treasury for current and future contract pricing, and share with it their due diligence on accepted contract prices.
Minister Ncube said the pricing framework adopted by suppliers is characterised by forward pricing models and benchmarking prices to frontloaded parallel market exchange rates.
“These pricing models are leading to extortionist pricing of goods and services supplied to the Government ministries, departments and agencies not anchored on economic fundamentals,” he added.
Marked discrepancies were observed in prices quoted for Government contracts and other consumers in the private sector.
This has resulted in the rapid erosion of budgeted resources.
Punitive measures will be taken against public officials complicit in overpricing and procurement malpractices, while suppliers will be blacklisted. Finance and Economic Development Permanent Secretary Mr George Guvamatanga said “there is no going back on the decision”.
“All invoices and contracts priced using parallel market rates will only be paid after they have been adjusted in line with the willing buyer-willing seller (WBWS) exchange rate,” he said.
“There is no exception to this requirement. Those who are keen to continue doing business with the Government will have to adjust their pricing models.”
Government, he added, has continued to pay all invoices that did not require revalidation.
“We have already started paying revalidated payments which have been revised in line with the prevailing official exchange rates.”
Mr Guvamatanga indicated that no legal obligation arises from a “dirty contract” that is using an illegal exchange rate.
In the latest Monetary Policy Statement the Reserve Bank of Zimbabwe continued with its hawkish stance by maintaining a tight monetary policy to anchor inflation and exchange rate expectations.
The central bank expects month-onmonth inflation to continue declining until year-end.
Governor Dr John Mangudya said the current tight monetary policy stance, together with the favourable uptake of Mosi-oa-Tunya gold coins as an alternative store-of-value instrument, would continue to support stability in the exchange rate and also sustain the present disinflationary trend.