Zim dollar balances: CZI calls for UN conversion rate
Saturday, 19 November 2011 18:11
BY NDAMU SANDU
THE Confederation of Zimbabwe Industries (CZI) has proposed that government use the UN conversion rate of 35 quadrillion Zimbabwean dollars to US$1 on liabilities rising prior to the dollarisation of the economy. The move, if implemented, would bring closure to an issue which has been pending since the country dumped the Zimbabwean dollar for multi-currencies in January 2009.
“We recommend that this exercise is speedily concluded using the UN rate of 35 quadrillion Zimbabwe dollars to US$1 dollar,” CZI said, adding that the rate be adopted for any and all liabilities in the economy arising prior to February 2009 to be backed by Statutory instrument.
This is one of the recommendations the industrialist’s body presented to Finance minister Tendai Biti for consideration in crafting his 2012 national budget.
Biti presents the budget to Parliament on Tuesday.
In his maiden budget presentation in 2009, Biti set aside US$6 million to clear all Zimbabwean dollar balances.
However, nothing has moved amid allegations that some bank accounts had suddenly fattened in anticipation of the “windfall”.
“There have been slow measures on this exercise and confusion over the rate of Zimbabwe dollar and US dollar to be used on liabilities arising prior to the dollarisation of the economy in 2009,” said CZI.
The confederation recommended the creation of an Infrastructure Fund, which collects a statutory levy of 5%, and the creation of a board that becomes a bankable institution to raise finance for key projects as opposed to government tradition of simultaneously doing numerous projects that do not get completed.
It said the Infrastructure Development Bank of Zimbabwe could manage this fund.
“The current level of infrastructure is making it difficult to conduct business and is hindering the economic growth of the country,” it said.
The country’s infrastructure is deteriorating and according to estimates, requires US$16 billion for rehabilitation and upgrading.
Government has already said it has no money to rehabilitate the infrastructure and asked for private sector’s support through the public private partnerships.
Tuesday’s budget presentation by Biti would be closely followed by all critical sectors of the economy to see how he would allocate resources.
Analysts say the current budget is not developmental, as it allocates more resources to recurrent, instead of capital expenditure. Over 90% of the budget is recurrent expenditure, with salaries chewing the bulk of that allocation.
This means that the Treasury is left with little fiscal space and Biti last year said that so constrained is the ministry that it requires “fiscal marksmanship” in allocating resources.
Witness Chinyama, head of Research at Kingdom Financial Holdings Limited, told Standardbusiness that he is not expecting surprises in terms of resource allocation as recurrent expenditure has always got the chunk of resources during budgets.
Chinyama said Treasury has to avail more funds to the central bank, which is at the core of the financial sector stability.
Biti said recently, the country will incur a US$700 million deficit this year. But Chinyama said Biti has to say how the hole would be plugged.
Presenting his Budget Strategy Paper (BSP) in the House of Assembly last month, Biti said the economy would grow by between 7,8% to 9% next year from the anticipated growth of 9,3% in 2011.
Agriculture and mining would be the major drivers of this growth.
The balance of payments position is projected to improve, from a deficit of US$789,7 million in 2011 to US$438,2 million in 2012.
The improvement is on the back of anticipated export growth and marginal positive change on the capital account, according to the BSP.
Revenue growth to 34% of Gross Domestic Product from the current 30% would be driven by current tax reforms targeting increased automation of the tax collection system.