Former Finance Minister and Movement for Democratic Change vice-chairman Tendai Biti yesterday said Zimbabwe’s 2019 budget was meaningless because it was not clear which currency it was based on.
He said the country currently has three currencies, the United States dollar, the bond note and the electronic money (RTGS).
Zimbabwe has actually nine currencies under its multi-currency system excluding the bond note and the electronic money. These are the United States dollar, the South African rand, the Botswana Pula, the Euro, British pound, Australian dollar, Chinese yuan, Japanese yen and Indian rupee.
Biti said: “To maintain the fiction of a US$1:1 bond makes this budget fail even before it has started. The reality out there, Hon. Speaker Sir, is that we are existing in a period of serious structural exchange distortion. We are existing in a period of a multi tier pricing system; there is a price in US dollars, bond notes, and RTGS.
“The (going) exchange rate in the past two months has been a rate of 1:3.50 or 3.50. In other words, to purchase US$100 you require $350 of the local currency, whether it is bond notes or RTGS. So, we cannot run away from that reality.
“If we have a budget of $8 billion, surely it cannot be US$8 billion. In reality, it means that it is 8.5 divided by 3.5. It also relates to the GDP. We have got a contested terrain of the GDP. We have got the transitional stabilisation plan speaking to a rebased GDP of $25 billion. What is this $25 billion? Is it US dollars?
“Surely, we are not at US$25 billion economy. If that is the case, you then have to discount the rebased GDP of $25 billion by the going rate of 3.50 or the Old Mutual implied rate, which would mean in real terms that our GDP is around US$8 billion.
“Unless and until the budget and the Minister is bold enough to deal with this elephant in the living room, the issue of the current expression of the budget and the decimation of the fiction of 1:1 then the budget itself becomes facial. It is a waste of time,” he said.
Below is Biti’s full contribution:
HON. BITI: Hon. Speaker Sir, it is a great pleasure to debate the 2019 National Budget. This budget, Hon. Speaker Sir, could not have come at a time of great fragility and great vulnerability of our country. The economic situation is dire, difficult and is arrested by a number of multiple imbalances. These include the fact that for many years our economy has been stuck in a recession characterised by low output. Since 2012, our economy has basically been on a downward spiral recording GDP declines.
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