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Mid-Term Fiscal & Monetary Policy Reviews of 2006 - Report of
Budget, Finance and Economic Comm [S.C 24, 2006]
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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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.
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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