Mthuli Ncube Urged To Present Fiscal Measures To Complement Monetary Policy
Finance Minister Mthuli Ncube has been urged to promptly present fiscal measures that complement the monetary policy announced by Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu last week.
The 2024 Monetary Policy Statement outlines key strategies and measures aimed at achieving currency stability. These include the introduction of a structured currency called ZiG, backed by reserves and royalties.
Economist Gift Mugano suggests that Minister Ncube should not delay presenting his mid-term budget review in July or exclusively favour the use of USD over ZiG. He said:
The Minister of Finance must address the following:
1. Directing all local payments by the GOZ to be in ZiG;
2. Directing all duties, taxes, levies and fees including government services such as passports, birth certificates, death certificates, etc to be in ZiG;
3. Directing fuel stations to accept both ZiG and USD – this must enforced in line with the spirit of the use of a multi-currency regime;
4. Recalibrating the financing model for the public infrastructure with a view to moving away from using cash to long-term finance e.g., diaspora bonds;
5. Setting aside a budget for the liquidation of the 25% export retention surrender requirement view a view to stop the RBZ from printing money;
6. Present a new budget statement in ZiG – this budget must include a supplementary budget with a view to accommodate the exchange movements as the current has been eroded by exchange rate upheavals. This submission is grounded on the fact that the fact that the exchange rate shot from ZWL$6,000/US$1 when the 2024 budget was presented to ZWL$33,882.72 as of 5 April 2024.
7. Downward review of taxes and elimination of some tax heads such as the sugar tax – the current tax regime is causing inflation in USD which means that inflation in ZiG will be massive.
The annual inflation rate in Zimbabwe has recently risen, reaching an over-one-year high of 55.3% in March 2024. This increase follows a rate of 47.6% in February.
The depreciation of the now-discarded Zimbabwe dollar played a role in this surge. Since the beginning of the year, the Zimbabwe dollar experienced a decline of more than 70% against the US dollar before being replaced by ZiG last week.
The introduction of ZiG marks Zimbabwe’s sixth attempt at creating a new currency since 2008.
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