Desperate times don’t need desperate measures
HARARE – Finance minister Tendai Biti’s state of the economy address on Monday has revealed the desperate situation Zimbabwe finds herself in.
Two recent events clearly support this picture of a country limping heavily with no permanent fix in sight to end the problems created by a hurried constitutional referendum.
First, Biti announced they had raised $20 million from a targeted $40 million through 365-day Treasury Bills (TBs) to fund the referendum through a float to Old Mutual and National Social Security Authority (Nssa).
Then he also hiked excise duty on fuel, triggering an increase in the pump price of gas, goods and services in the economy.
The fuel hike is meant to help government raise money to fund watershed elections expected later this year.
There is everything wrong with the float of the bond and fuel price increases.
Nssa has the biggest funds which have been ventilating the market through investments in the banks.
Upon maturity the funds are sucked into the bond leaving banks with no room for rolling over cash for the productive sector.
The $40 million bond means government has mopped cash from the financial market, crowding out local companies.
Instead, the $40 million bond leaves bank without liquid, raising real fears of an illiquid market in the coming months at a time investors are jittery at the prospects of elections.
We had hoped Biti would seek lines of credit to cushion the banks from a liquidity crunch as the new injection would act a buffer to the hole created by the bond.
Last year Biti failed to raise $20 million that had been anticipated would be attracted by the TBs floated onto the market.
No one showed an appetite for them.
In the short term there is no anticipation of a glut of cash especially when the tobacco season has gotten off to a slow start punctuated by depressed prices.
And hiking the price of fuel to fund polls is a double-edged sword for Biti.
Overburdened taxpayers who are among the Tsvangirai-led MDC supporters will feel the pinch from the ripple effects of fuel price hikes and this is coming months before his party engages them in its electoral crusade.
Desperate times do not need desperate measures, minister!
Why hold an election when there is no money in the kitty?
This is why we don’t buy the Prescribed Asset Requirements rule for pension funds’ excuse, in the case of the $40 million bond floated to Old Mutual and Nssa. – Staff Writer