The Southern African Times Head of Markets Dr Admire Dube sat down with Zimbabwe’s Finance Minister Mthuli Ncube during his visit to London. The interview was set as part of SAT Interviews which are broadcasted on The Southern African Times YouTube page.
The full transcript of the questions and answers are below:
Question 1:
What will you consider as a major economic highlights or achievements of Zimbabwe’s second Republic and why?
Response
You may recall that when the second Republic assumed office in 2018, the economy was faced with sustained high fiscal deficits driven by recurrent expenditures, emergence of inflation, infrastructure deficit and low productivity. Further, the situation was compounded by structural deficiencies such unfavourable doing business environment and weak governance in some areas.
To date, as a government have managed to record significant progress in the following areas:
However, the reform process was hindered by a number of factors including recurrent droughts, cyclone Idai, COVID-19 pandemicand the recent geopolitical developments, among other challenges.
Question 2:
Since your arrival as Minister of Finance in 2018, you have publicly announced several times the need to reduce recurrent expenditure and subsequently you would also pronounce surpluses in your national budgets and 12 months leading to February 2022 Treasury is reported to have maintained a healthy surplus of ZWL 6 billion.
The question people ask are, is it prudent to hold on to zeros on paper when those zeros can be used to reduce Government internal debt or capacitating health and other infrastructure or resuscitation of floundering state enterprises that are a lifeline to local industry like NRZ or improving Government employees’ salaries.
Response
The question that the people are asking is logically correct, however, let me remind you that Government is operating on a cash basis, that is we spend what we have. You may want to know that there is always a mismatch in the actual cash inflows and expenditures, hence it is, therefore, to always have some resources aside so that we do not end up in unfunded deficit situation.
Furthermore, it should be realised that it is always important for Government to always have a buffer (surplus) that will cater for unavoidable eventualities, for example natural disasters, pandemics and any such incidences. This is important for Zimbabwe as we have limited sources of finances unlike other countries. By the way, such surpluses have been very useful in Government’s response tothe Cyclone Idai disaster, the drought andmore recently the country’s very successful response to the Covid-19 pandemic.
While it sounds logical for Government to reduce its internal debt, it should be noted that Government domestic debt is also important to develop the country’s money market which is important for promoting savings andinvestment in the economy, hence economic growth.
Question 3:
Hon. Minister you will agree that we are holding this discussion against the backdrop of Zimbabwe’s annual inflation surging to 191% as at June. You announced a raft of measures this Monday the 27th to tame the beast. Are you confident these are adequate to stabilise or even improve the situation?
Follow up: The Monetary Policy Committee aggressively increased interest rates to 200%, (a cumulative 14000 basis points for the past year!) to discourage expenditure and eventually tepper demand for goods/services too, which lowers inflation. However, weren’t these measures going to be more effective if accompanied by raising of the reserve ratios which were kept at 10% for demand deposit and 2.5% for savings to extra tighten money supply?
Response
We are very confident that we are taking the right measures to tame the beast. As you can see, we are responding by complementary fiscal and monetary measures to restore stability.
My confidence stem from the fact we have all the necessary fundamentals for a stable domestic currency and inflation by extension in place in the form of substantial amount of foreign currency being generated by the economy, near balanced budget and suppressed reserve money growth
In response to your follow up question, our Central Bank is extending focus to broad money targeting to control inflation. Therefore, the hiking of interest rate is meant to tighten money supply situation and cut out speculative borrowing which actions will bring to bring inflation down.
Government continues to monitor the situation, should inflation continue to increase, I believe the Monetary Policy Committee will respond appropriately by reviewing thereserve ratios.
While at it you need to understand that inflation in Zimbabwe is not only driven by domestic factors but is also impacted byglobal dynamics which sometimes limits our response to domestic price increases.
Question 5 :
The idea behind introduction of GOLD COINS is to allow people to buy them as a store of value and ease pressure on demand for US dollars by people who don’t need USD to transact but are rent seeking amid a high inflation environment. But people will not hold physical gold, just certificates to the effect. Won’t uptake of these be affected by negative perceptions people have in the Central Bank that it may continue printing unbacked certificates?
Response
Let me state on record that the gold coins will be available to buyers in physical form. The buyers will be issued with certificate to authenticate their legal ownership of the coins. It is presently illegal to deal in gold without a license in Zimbabwe and in line with the need to enhance the traceability of the Gold the certification process for the coins must meet international standards, including meeting traceability and AML/CFT/PF rules and guidelines.
As we speak, the Reserve Bank of Zimbabwe is working on the operational modalities of the Gold Coins but rest assured you that Government will make sure that the coins of of international standard.
Question 6
In August 2021 Zimbabwe got approved by the IMF for Special Drawing Rights of equivalent to 1 billion USD. Has treasury stuck to its self-drawn SPECIAL DRAWING RIGHTS UTILISATION PLAN so far?
Response
In 2021, Government made two drawdowns amounting to US$279.7 million and these were utilised in line with the approved utilisation plan. The resources went towards the following areas:
In 2022, the target is utilisation of an amount of US$145 million. Up to date, no amounthas been drawn down with the expectation that it will be utilised during the last half of the year.
So, in short, yes Government is sticking to theagreed Draw Down Plan.
Question 7:
What does the immediate future hold for an ordinary Zimbabwean who looks up to your Government’s pronouncements to improve their day to day lives…?
Response
The Government of Zimbabwe is working tirelessly to improve the lives of All Zimbabweans. We are leaving No-One and No Place Behind. The Development agenda is underpinned by an inclusive and shared growth approach.
Infrastructure spending is key, as we are continuing to deliver the backbone for service delivery in Health (we are building new hospitals, rural health centres and recently purchased ambulances for all our provincial hospitals)
We will remain aggressive in building new dams, completing ongoing projects and also investing in infrastructure for reticulating water for domestic use and also large scale evacuation to support irrigation development.
We remain focused on rebuilding and modernising the nation road network
We are expanding power generation capacity and increasing the proportion of modern green solar technologies
