PARLIAMENTARIANS have called on economic stakeholders to be honest when meeting President Emmerson Mnangagwa over the deteriorating state of the economy blamed on the unusual growth in the money supply, thereby depreciating the Zimbabwe dollar.
BY TATIRA ZWINOIRA
Yesterday, the Zimbabwe National Chamber of Commerce (ZNCC), Confederation of Zimbabwe Industries (CZI), Bankers Association of Zimbabwe, Econet Wireless Zimbabwe and Cassava Smartech Zimbabwe Limited made presentations to the Budget, Finance and Economic Development Parliamentary Committee.
The presentations were in response to the 2020 Monetary Policy Statement released last month, which failed to address the continued depreciation of the Zimdollar, which has brought hyperinflation and worsened business and consumer livelihoods.
“You come here and tell us the economy is not well, but we are shocked when you meet HE (Mnangagwa), you paint a good picture and say the economy is on the right track. Can you tell us why?” Budget, Finance and Economic Development Committee chairperson Felix Mhona asked.
In response, ZNCC chief executive officer Christopher Mugaga said: “You raised the issue of ‘when you meet HE’ you are nice. I don’t know, I am not sure. Maybe it’s a case of an approach we use, but the truth of the matter is maybe — being a spokesperson for the chamber — there are a number of issues that are not in order.
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“I think from the times of the unusual appetite to print money from the days of (former central bank governor Gideon) Gono up to now, we have been ever so talking. I think you hear my colleagues are delving into the issues. I think a number of minds know what money supply is, everyone wants it to stop. It’s not normal”.
Mugaga said the moment the Zimdollar was introduced in a statutory instrument, it was already a disaster and he called on the quality of policy-making to improve.
He said as a first step in fixing the economy, Finance minister Mthuli Ncube needed to be honest.
“Last time we met parliamentarians, we spoke about how policies are being missed ‘Nicodemously’ … or how they see the light of day without Parliament having agreed to it,” Mugaga said.
The reason why the increase in the money supply causes a currency to depreciate is due to more currency chasing the same quantity of goods, resulting in firms increasing prices to restore value.
As a result, inflation is accelerated, affecting business and consumers alike.
The increase in money supply has been blamed on government borrowing to fund its excessive expenditure, which both the World Bank and International Monetary Fund have raised concern over.
“The problem we are having in the economy is growth in the money supply. Just to highlight that in the last quarter of 2019, the money supply was $35 billion and in first quarter of 2020, it is now at $46 billion, which is quite a huge growth in money supply,” CZI chief economist Tafadzwa Bandama said.
“We also want to highlight as CZI that supply of services to government must be rationalised, especially when it comes to payment. If say a supplier does a job for $3 million, for example, instead of giving them the whole $3 million which they will use to rush to the parallel market, it’s better to pay in tranches so that we do not have a run on the exchange rate.”
She said if they were paid in full, it would cause a depreciation on the exchange rate.