GOVERNMENT has decided to put measures in place to cut down on payments to contractors and service providers in order to manage financial stability, NewsDay Business can report.
A source from the Finance, Economic Development and Investment Promotion ministry disclosed that this strategy includes reducing payments to contractors and service providers.
“The government has decided to reduce payments to contractors and service providers,” the source said.
“This decision comes as we face mounting pressures on the US$/ZiG parallel market exchange rate, which poses a potential threat to price stability and overall economic stability.”
In an interview, prominent economist Farai Kageva highlighted the economic benefits of government’s decision.
“Reducing the growth of money supply is a prudent move. It will help curb inflationary pressures, which have been eroding the purchasing power of the local currency,” he said.
“By stabilising the exchange rate, we can create a more predictable economic environment that is conducive to investment and growth.”
Kageva said the move was particularly crucial given that the ZiG currency is backed by gold.
- Govt to cut money supply growth to stabilise economy
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“By gold-backed currency, it means that our money supply is inherently tied to the value of our gold reserves. By controlling the money supply, we ensure that the value of the ZiG remains stable, which is essential for maintaining confidence in our financial system,” he said.
The decision to cut payments to contractors and service providers is expected to have a significant impact on government spending.
Kageva emphasised that this is a necessary step to instil fiscal discipline and restore economic stability.
“Short-term sacrifices are required for long-term gains. By reducing expenditures now, government can avoid more severe economic disruptions in the future,” he noted
Similarly, the Finance ministry is also exploring additional measures to support this initiative.
These include tightening monetary policy and enhancing mechanisms for monitoring and controlling money supply growth.
Meanwhile, Treasury has made significant payments to contractors and service providers from July 1 to 5, 2024, totalling ZiG635 million, and from July 8 to 12, 2024, amounting to ZiG295 million.
Additionally, from July 24 to 29, 2024, Treasury is scheduled to pay out ZiG423 million.
