A PARLIAMENTARY committee has taken a sharp aim at both fiscal and monetary authorities, saying both have “gloss(ed) over the real challenges facing th
e economy” and evaded tackling inflation.
In a clear rebuke of the Reserve Bank of Zimbabwe (RBZ) and government, the budget, finance and economic development portfolio committee said inflation continued to rise and remained “untamed” despite government and the central bank declaring it “number one enemy”.
The committee, chaired by businessman and Zanu PF MP for Guruve North David Butau, said the central bank, whose governor Gideon Gono has been appointed the agent of economic reform, had undertaken numerous projects that had fuelled inflation, yet Gono’s monetary policy had “no clear measures for bringing down the galloping inflation” levels.
The committee accused government of reckless spending, saying this was fuelling inflation.
In what amounted to a veiled disapproval of the current central bank’s operations, the committee said the central bank’s quasi-fiscal operations should be brought under a quasi-fiscal coordinating committee to be chaired by Finance minister Herbert Murerwa “to protect the legality of quasi-fiscal operations”.
This seemed to suggest that the legality of Gono’s current quasi-fiscal operations, which have been a source of strong disagreements between Gono and Murerwa, were questionable.
Gono has clashed with several of President Robert Mugabe’s cabinet ministers over perceived encroachment into their operations due to his quasi-fiscal activities which have seen him disburse large sums of money to government departments and parastatals.
The committee said the operations should be accounted for in Murerwa’s budget proposals “so that all funds are accounted for”.
The committee also expressed grave concern over growing government spending.
It said it had “noted with alarm, the minister’s announcement of a supplementary budget” which had brought total expenditure for 2006 to $450,2 trillion.
“The supplementary budget exceeds the original budget for the year 2006 by an astounding 164%. The pronouncement of the supplementary budget that is thrice the size of the original budget strains the already constrained government expenditure. The Minister of Finance admitted that government deficit financing is the major source of money supply growth and consequently inflation,” the committee said.
The committee said: “Fiscal restraint should be exercised as much as possible to minimise government borrowing. Ministries should confine themselves to spending what was budgeted for and not carry out tasks that will necessitate government borrowing because this inevitably fuels inflation.”