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The Mid-Term Fiscal & Monetary Policy Reviews of 2006 - Report of Budget, Finance and Economic Comm [S.C 24, 2006]
First report of the Budget, Finance and Economic Development Committee
Second Session Sixth Parliament, Parliament of Zimbabwe
Presented to Parliament in October 2006

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EXECUTIVE SUMMARY
The Committee on Budget, Finance and Economic Development analysed the Mid-Term Fiscal and Monetary Policies for 2006, announced by the Minister of Finance and Governor of the Reserve Bank respectively. These policy measures were announced at the end of July. After analysis of the documents, the Committee met with stakeholders, the Minister of Finance and the Governor of the Reserve Bank of Zimbabwe.

The Committee noted that the two policies were announced at a time when the economy is shrinking, with the productive sector not performing to expectation, savings and investment low and the Government deficit astronomic.

Under the Fiscal Policy review, the Committee noted that by end of June, 70% of the budget had been exhausted and that the supplementary budget was thrice the size of the original 2006 budget. Government deficit at 56%, would be mainly financed by Government borrowing which had grown to 927% during the first half of the year. The Committee also noted with concern that revenue proposals were limited and recommends that capital expenditure should not be at less than 30% of the budget. It was noted that the privatisation and commercialisation of public enterprises is slow and that these continue to perform badly and are straining the already constrained national fiscus.

In the Committee's analysis of the Monetary Policy, it was snoted that there are numerous factors, some unavoidable, such as importation of necessary consumables, that contribute to the risk of inflation. However, no clear measures for bringing down the galloping inflation were announced.

The Committee noted Quasi-fiscal operations in the form of direct disbursements to Parastatals and direct importation of Agricultural Inputs and fuel.

The report also alludes to the exchange rate and exchange rate management. The gap noted between the official and parallel exchange rates could lead to leakages of the foreign currency. Leakage of precious minerals may cease in the near future as experts have been engaged to work in that area. Currency reform was welcomed as it eases the burden on financial transactions as well as computer systems.

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