FINANCE minister Herbert Murerwa yesterday announced an end to the central bank’s quasi-fiscal operations, saying all resource allocations would no
w be made through the national budget under a “credible anti-inflation programme”.
The decision appears to have been precipitated by increasing discord between government ministers and central bank governor Gideon Gono over what cabinet members view as Gono’s overbearing influence over government ministries and departments as a result of his quasi-fiscal operations.
“As we move forward, it will be critical that the 2007 budget expenditure levels be consistent with a credible anti-inflation programme, targeted at drastically reducing money supply growth. This is the only way we will begin to have a firm hand in containing inflation, a prerequisite for building confidence and dealing with high inflation expectations,” Murerwa said.
He said a comprehensive package to reinforce policy measures to restore macroeconomic stability would encompass the “phasing out of quasi-fiscal operations and allocating resources through the national budget”.
Murerwa said he would embark on a consistent fiscal consolidation and expenditure restructuring focusing on non-capital development, health and education, the elimination of wholesale subsidisation as well as “disinflation monetary policy and interest rate management framework targeting reduction in money supply growth”.
Murerwa’s budget outturn figures included, for the first time, a consolidation of quasi-fiscal expenses incurred by the Reserve Bank on behalf of government.
Early this year, the International Monetary Fund (IMF) sparked apprehension in the economy after revealing that the budget deficit outturn had been well over 60%, and not 3% as presented by Murerwa.
The IMF said the biggest part of the deficit had been concealed through the quasi-fiscal operations of the central bank.
Murerwa’s disclosures appear to be an attempt to become more open about the deficit situation and avoid criticism by the IMF, whose mission is expected in the country next week.
The IMF has criticised the central bank’s quasi-fiscal role.