RESERVE Bank governor Gideon Gono’s commodity pricing will not benefit the country in any way as long as government continues to dole out money wi
thout auditing its use on the ground, the Zimbabwe Independent heard this week.
Gono this week unveiled the Basic Commodities Supply–Side Intervention Facility (Bacossi) to promote a speedy return to normalcy in the supply of essentials. The facility, which will be administered in the same manner as the Agricultural Sector Productivity Enhancement Facility (Aspef), will see the RBZ subsidising the production of virtually all basic commodities in the country. The intervention will force government to print money, a move that will fuel inflation.
“Our strongest conviction is that Zimbabwe’s inflation and related economic difficulties can be effectively resolved through the active revival of the supply side of the economy, even if it means we subsidise for a while that supply chain in order to jump-start the recovery process,” Gono said in his monetary policy statement on Monday.
He said under Bacossi, primary, secondary and tertiary producers and suppliers would have access to concessional, production-targets-linked financial support for working capital requirements.
“The facility is a 270-day or nine months window, reviewable and renewable, through 90-day instruments,” he said.
“This window is meant to give the targeted producers a three-by-three month window within which they can restore their production facility utilisation to levels before June 1 2007 or better, at affordable but sustainable prices.”
Observers said by introducing the new facility, Gono had reverted to quasi-fiscal interventions, reneging on his earlier statement to stop unbudgeted expenditures.
Gono justified his position by blaming government’s knee-jack policies for causing unintended consequences.
“These are the unintended consequences of some of our behaviours as Zimbabweans,” he said. “They end up imposing a recovery burden, or tax on the whole economy and taxpayers through quasi-fiscal interventions.”
He, however, pointed to the risk that cheap goods could lead to unsustainable pressure on consumption patterns, installed production facilities, and hoarding for resale in neighbouring countries because Zimbabwean goods would suddenly become too cheap.
A similar facility, Aspef,
has been subjected to serious manipulation and has failed to jump-start production in the agricultural sector, with the RBZ losing trillions of dollars in unrecovered loans.
Since the launch of Aspef loan facility two years ago, the RBZ has doled out in excess of $9 trillion in different sectors of agriculture but has managed to recover only $1,5 trillion.
Over $5,5 trillion of the distributed funds is not likely to be recovered since the beneficiaries have since been evicted from their properties and no longer have the means to produce.