Finance and Economic Development Minister Professor Mthuli
Ncube has said the price shocks that were recently experienced by the market
are temporary as the economy adjusts to the new policies, which he has
described as “bitter medicine” that will help the economy stabilise.
Prof Ncube said consumers and retailers resorting to panic
buying and speculative activities are likely to incur heavy loses.
In an interview from Bali, Indonesia, where he was
attending the IMF and World Bank meetings, Prof Ncube said there is need for
the market to be patient.
“Ordinary Zimbabweans should not go into panic buying of
goods and commodities, as prices will drop and they will lose money. Likewise,
wholesalers and retailers should not hoard goods in anticipation of obtaining
higher prices in future. They will incur loses. I urge everyone to be patient.
We will turn around the fundamentals of the economy through various measures
contained in the Transitional Stabilisation Programme,” he said.
The TSP is a recently adopted economic blueprint that will
guide the economy through December 2020.
Prof Ncube said while the Intermediated Money Transfer Tax
of 2 cents per every dollar is painful, it is necessary to achieve sustainable
economic growth.
“The interventions that I have put in place are designed to
restore fiscal equilibrium and general macro-economic and monetary sector
stability. This will then create the right environment for growth. The price
shocks are temporary but inflation will stabilise as the markets finds
equilibrium again.
“Sometimes bitter medicine causes the patient some
discomfort as they swallow it. As a country, we have to take the pain early
enough so that by year two of the reform agenda, we will have completed the
bulk of reforms enunciated in the Transitional Stabilisation Programme.”
Last week, economist Mr Clive Mphambela cheered Professor
Ncube’s 2 cents tax, saying it is a quick-win for revenue generation.
“There are many reasons why Zimbabweans must share the pain
of economic adjustment. For decades now, the grey or black economy participants
such as smugglers, informal traders, money changers and second-hand vehicle dealers
have made fortunes yet they have declared nothing to the fiscus.
“However, everyone enjoys the benefits of subsidised health
care, education and transport. Every citizen also enjoys subsidised electricity
and fuel. Many informal and informal business do not pay PAYE or remit VAT to
the revenue authority.
“Taxes will get us out of the woods. Successful countries
generally have high taxes. Scandinavian countries are known for having very
high taxes on income. According to the OECD, Denmark (26,4 percent), Norway
(19,7 percent) and Sweden (22, 1 percent) all raise a high amount of tax
revenue as a percent of GDP from individual income taxes and payroll taxes.
This is compared to the 15 percent of GDP raised by the United States through
its individual taxes and payroll taxes,” he said.
A recent research note from Old Mutual stockbrokers
indicated that the new tax will widen the tax collection base in the informal
sector.
“Review of the transfer tax significantly widens the tax
collection base, particularly in the informal sector. The efficacy of the
measure is enhanced by limited transaction media in the absence of cash. At
current transaction values, the measure has potential to generate an additional
$2,6 billion annually. On the flipside, the tax presents an additional cost,
typical of a contractionary fiscal policy. Overall (though full implementation
modalities are still outstanding), the motive to fund Government expenditure
through tax enhancement is welcome,” read the research note.
However, the estimate on revenue generation was made before
a cap on thresholds was later made by Treasury.
Government has already stated that it will ring-fence the 2
cents tax to ensure that it is directly channelled to service delivery and
programmes that will directly benefit the people.
Prof Ncube said the falling parallel market exchange rate
between the US dollar, the bond note and RTGS balances was expected as rates
were being driven by “over-speculation”.
He said the rates are expected to reach parity, or even
decline further.
“There was over-speculation in the parallel market when the
rates were going up. We have guaranteed value and the conversion rate of 1:1
and rates should move to that parity rate or even lower.”
By yesterday, the parallel market exchange rate had dived
from an all-time high of 1:6 (US$100 for $600 RTGS) reached last week to 1:150
(US$100 to $150 RTGS).
However, there were very few sellers.
Treasury contends that the cash shortages will be solved in
time once the full effect of the economic stabilisation programmes takes root.
“This cash shortage issue is not new. There are many
reasons behind it. It’s got to do with the confidence and also the banking
sector. We are working on building this confidence, recapitalising the banks
but also making sure that we limit inflation erosion on whatever cash balance
the people have.
“We issued the 5 percent reserve during the monetary policy
statement, but we also hope that the introduction of FCAs will help the
citizens to put more money into the banking sector so that money returns to the
banks. It’s a matter of building confidence, showing that we are dealing with
the micro-balances and people believing in what we do.
“It’s not a quick fix, it’s not a silver bullet that will
heal in one day, it takes time, but I would like the nation to be patient. We
will fix it for the benefit of everyone,” said the Finance Minister.
A snap survey conducted by The Sunday Mail in some major
supermarkets in the capital yesterday showed that prices were gradually
adjusting to normal levels. Retailers were restocking following stock-outs
induced by a bout of panic buying last week.
Some retailers were rationing the quantities consumers
could buy in order to guard against hoarding. Sunday Mail
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