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Gono bunks supplementary budget
Paul Nyakazeya and Constantine Chimakure, The Zimbabwe Independent
September 07, 2007

http://www.zwnews.com/issuefull.cfm?ArticleID=17317

Divisions between finance minister Samuel Mumbengegwi and Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono deepened yesterday after the former devalued the local currency from US$1: $250 to 30 000 without consulting the central bank chief. Apart from that, Gono boycotted Mumbengegwi's presentation in Parliament of the $37,1 trillion 2007 supplementary budget. This is the first time that Gono has not attended the mid-term and fiscal policy presentation since he became governor in December 2003. Sources last night said the devaluation of the Zimbabwe dollar to $30 000 from $250 against the US dollar was done by Mumbengegwi without input from the RBZ, which in April introduced a sectoral devaluation of US$1: $15 000 under the guise of Drought Mitigation and Economic Stabilisation Bonds. The sources said the RBZ would soon engage the Finance ministry to find out how it would proceed with the drought mitigation scheme.

Gono and Mumbengegwi have clashed on several occasions. Recently cabinet had to intervene and compel Gono to print $100 trillion to meet civil servants' salary increments after the central bank chief had turned down such a request from Mumbengegwi. Sources said Gono and the Finance minister were also heading for a clash on how to finance ministries' requirements after Mumbengegwi allocated them a total budget of $37,1 trillion from a requested $255 trillion. The sources said Mumbengegwi was set to ask Gono to print money to meet the ministries' demands. Last night, Gono's spokesperson Kumbirai Nhongo confirmed the governor was not at parliament but denied the central bank boss had snubbed Mumbengegwi's budget presentation. "The governor did not boycott, he had an engagement elsewhere and the minister was aware of that engagement," Nhongo said. "To suggest otherwise is to be mischievous."

Before the devaluation, the Zimbabwe dollar has been trading at $250 to the US$1 since July 31 2006. As of yesterday the local currency was trading at above $240 000 to the US dollar, while the British pound and South African rand were trading above $500 000 and $35 000 respectively on the black market. "In line with Section 47 of the Reserve Bank of Zimbabwe Act, the Minister of Finance will determine the country's exchange rate policy, which the central bank implements," Mumbengegwi said yesterday. "The Reserve Bank of Zimbabwe will therefore adjust the exchange rate applicable to all purchase and sale of foreign exchange in the market from $250 per US dollar to $30 000 with immediate," Mumbengegwi said. Mumbengegwi said the new rate will apply to all Zimbabwe Revenue Authority customs and incomes tax valuations. The sectoral devaluation encouraged exporters to liquidate their foreign currency but did not improve inflows. The devaluation by Gono was done under the guise of Drought Mitigation and Economic Stabilisation Bonds.

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