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CZI Calls For Clipping Of RBZ’s Wings

THE Confederation of Zimbabwe Industries (CZI) on Wednesday passed a resolution that parliament should ratify and approve all quasi-fiscal activities by the Reserve Bank.

The CZI however said it was not happy with the central bank’s donation of vehicles to it.
Speaking at the two-day annual congress in Harare, CZI members blamed the Reserve Bank for stoking inflation, currently at 231 million%, through unilateral involvement in quasi-fiscal activities and excessive money supply growth, whose figures were last released in March.
“Reserve Bank quasi-fiscal activities must go through Parliament,” declared the members whose theme was the restoration of the manufacturing industry.
“There is also need to focus on agriculture which is the backbone of the manufacturing sector. Value addition of locally produced raw materials can also turn the country’s comparative advantage to competitive advantage,” read another resolution.
Quasi-fiscal financing involves providing credit at low nominal interest rates to selected sectors with low prospects of repaying the credits resulting in them often viewed as subsidies or mere donations.
The industrialists also urged government to adopt an “Asian type” of economic policy characterised by free enterprise economies, citing Brazil, Russia, India, China and South Africa as examples of countries with favourable economic policies.
Sources within the CZI, however, said the decision to push for the involvement of legislators follows criticism on the recent donation of seven vehicles to the industrial lobby group by the Reserve Bank.
This move, the sources said, was seen by some members as an attempt by the Reserve Bank to “tame” the outspoken body, prompting the organisation to contemplate on how it would pay for the “donated” cars without straining relationship with Reserve Bank governor Gideon Gono.
“This gesture by the Reserve Bank received mixed sentiments from most members at the annual general meeting,” said the source. “The CZI could soon present a paper to the Reserve Bank on how it intends to pay for these cars rather than receive them for free.”
Opening the congress on Tuesday, Gono boasted of “pioneering” the quasi-fiscal interventions, blaming economic sanctions by the European Union and the United States.
He said low productivity in the manufacturing sector was also hamstrung by foreign currency shortages, “unscrupulous pricing” models and “protracted uncertainty” in the formation of an inclusive government.
Independent estimates suggest that capacity utilisation in the manufacturing sector is now below 30%.
“Without doubt, the current unfavourable state of affairs in our productive sectors, more so in manufacturing, has its roots in multi-dimensional spheres of causal factors,” Gono said.
Last month, the United Nations Development Programme also advised the Reserve Bank to cease financing quasi-fiscal interventions. The central bank has, however, continued pursuing what critics termed “supra ministerial” roles in the absence of a supplementary budget that resulted from ballooning government expenditure.

By Bernard Mpofu

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