Zimbabwe Finance Ministers says suspension of banks loans was a big hammer but it was needed

Then we have monetary policy discipline as well.  As His Excellency announced the previous week, the target for MO which we all worked together with him should be zero percent growth in reserve money growth for the rest of the year.  It is very important that we keep tight monetary and fiscal policy and that they are coordinated.  It is also important that we continue to support our exports which we are doing through various incentives.  Our remittances are coming in, so our current account is positively strong.  Those fundamentals are the first order of business.  Then I now turn to the behavioural.  These start with the behaviour of our financial institutions in terms of disintermediation of liquidity or monetary policy enactments where banks with some corporates or individuals are found rather than channeling liquidity into the real sector which is called the monetary transmission mechanism liquidity which finds its way onto the parallel market or stock market.  So, we now have a speculative bubble which we had to clip through the suspension of lending that we put in banks.  It was a big hammer but it was needed.  However, the hammer was lifted yesterday to make sure that those who were in the wrong are careful.  So the investigations continue but lending has resumed.  The impact is, this has halted the parallel market somewhat.  We have seen that and we are pleased with that.  This is also a behavioural issue on the stock market where we tightened regulations.  What was happening in the stock market is very similar to what was happening with ecocash, where you have got a stock broker with a trust account, which sits with a bank.  Below the trust account, we have a series of accounts belonging to many individuals but you cannot see those accounts.  So, whenever our shares are being bought or sold, money just moves below the trust account but you do not see the movement in the official account.  So, things were happening here but also the money was being moved from one individual to another, which is called third party account and this created a loophole for trading on the parallel market.  At the same time, creating an asset bubble in the stock market which was very unhealthy and so we had to prick that bubble and we sufficiently did so as of now.  We did well in terms of dealing with behaviour.

Of course while we have a dual currency, we feel we still need to strengthen the demand for our domestic currency.  So, the MTT tax was increased for US dollar transactions to signal that we prefer our own currency.  We have done a lot for what it is worth and I will be very happy to circulate to Members through your office the measures we have taken, one by one, to try and stabilise our currency.

We are also quickly aware of the transport woes.  I am digressing, you did not ask me about transport but His Excellency also opened the market for other players to come in and this is all designed to create competition and make transportation easy and the cost of transportation affordable.  We have done a lot to stabilise our currency.  Let me explain the action that we took at the beginning of the week regarding opening up borders to basic goods.  Two things were happening; to start with, we have a global situation where we have imported inflation.  Inflation has been rising globally since the last quarter of 2021 due to the perceived success of the global vaccination programme and the opening up of global value chains.  Inflation has been going up so has been oil price.  That is where it started and by the time we got to the conflict now happening in the eastern part of Europe, that only accelerated what had already started.  So, now we have inflation being pushed through our economy through the fuel channel and other goods and raw materials that we are importing, which is the global value chain.  It is also coming through the fertilizer, cooking oil and wheat market channel. That is something we should be wary of that globally, we might be heading into a very tight food security challenge for the rest of the year and this is worldwide, and not just for Zimbabwe.  Secondly, locally we have seen a spike in prices for no reason really other than profiteering.  So we had to act and try to make sure that basic commodities for the global and local reasons are available to citizens at affordable prices.  So, we opened up the border for basic needs and I think that is a good thing that Government has done to really look after citizens and to ensure affordability and availability of these goods.

Industry is still getting a lot of incentives through the various tax rebate schemes that I always bring before this House every time you approve the budget.  So they are getting those benefits as well as rebates for retooling.  They should have been retooled by now.  We cannot keep retooling forever.  We should have retooled and the cost of production should have improved and productivity should have also improved.  So, industry has been protected and it is now time to protect and support the citizens.  That is what we have been doing in terms of the mix of policies as they say policies have winners and losers.  In our own assessment, this bouquet of policies seem to indicate that there are winners than losers and that is what we want in any policy mix.  I thank you Madam President.

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