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Zimbabwe Central Bank plan to introduce controversial bond notes | Coastweek

HARARE Zimbabwe (Xinhua) -- Zimbabwean Finance Minister Patrick Chinamasa presents the 2016 Mid-Term Budget Statement at parliament building in Harare, Zimbabwe. In his statement, Patrick Chinamasa said that Zimbabwe has revised down growth forecast for 2016 to 1.2 percent from the initial 2.7 percent due to under-performance of agriculture. XINHUA PHOTO

Zimbabwe Central Bank plan to introduce controversial bond notes

HARARE Zimbabwe (Xinhua) -- Zimbabwe’s central bank on Thursday vowed to introduce local bond notes at the end of October despite public concern, arguing the measure is necessary to ease a cash shortage and boost foreign exchange inflows into the economy.

The central bank proposed to pay an export bonus of up to 5 percent to exporters through bond notes in May in order to boost foreign currency inflows and address current cash shortages.

However, there is concern the introduction of the bond notes is an attempt by the government to bring back the moribund Zimbabwe dollar through the back door.

Opposition parties have in recent weeks staged protests against the introduction of the bond notes which are backed by a 200 million U.S. dollar African Export-Import Bank (Afreximbank) facility.

Presenting its 2016 mid-term monetary policy statement, Reserve Bank of Zimbabwe Governor John Mangudya said the bond notes, to be at par with the U.S. dollar, did not mark the return of the Zimbabwe dollar because macro-economic fundamentals for the return of the local currency were not yet right.

"The bank has heard and taken note of the public’s concerns, fear, anxiety and skepticism of bond notes," Mangudya said.

"The bank is addressing the concerns by planning to introduce smaller denominations of bond notes of 2 U.S. dollars and 5 U.S. dollars," he explained.

In addition, the bank would set up an independent board to have oversight role of the issuance of the bond notes in the economy, he added.

The central bank governor said bond notes equivalent to about 75 million U.S. dollars would be circulating in the economy by the end of December 2016, while the ceiling of the 200 million dollar Afreximbank facility would be attained when total exports reach 6 billion dollars.

"The bond notes will be gradually released into the economy in sympathy with export receipts through normal baking channels," he said.

Zimbabwe abandoned its hyperinflation ravaged local currency in 2009 when the largest note was the 100 trillion denomination in favor of the U.S. dollar and eight other currencies that include the South African Rand, British Pound, Euro, Chinese Yuan, Japanese Yen and Australian dollar.

However, the U.S. dollar has become the main circulating currency and it too has become scarce, with the government blaming externalization and low exports for the shortage of the greenback.
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UPDATES:

IMF says no financing talks with Zimbabwe before arrears clearance

HARARE Zimbabwe (Xinhua) -- The International Monetary Fund (IMF) has said it is not discussing any financing program with Zimbabwe, which is pursuing a debt clearance plan with international financial institutions.

Zimbabwe in May hammered a plan to clear 1.8 billion U.S. dollars arrears to the IMF, World Bank and the African Development Bank (AFDB) to unlock fresh capital from the multilateral creditors, which suspended loans to the country at the turn of the century after it started defaulting.

Reserve Bank of Zimbabwe Governor John Mangudya said Thursday significant progress had been made and that Zimbabwe was on track to clear the arrears by December 31, 2016.

Responding to a question during a press beefing in Washington Thursday, the IMF director of communications and spokesman Gerry Rice said talks on financing could only start after Zimbabwe clears its arrears.

"I want to repeat that there’s no financing program under discussion with Zimbabwe at this point. Indeed, the authorities have announced a plan to clear the arrears. Once they are cleared, which they are not at this point, our board would need to discuss that," Rice said in a transcript of the press briefing seen by Xinhua Friday.

In April, Zimbabwe Finance Minister Patrick Chinamasa said the southern African country was preparing a financing program in anticipation of new funding from the creditors once it clears its arrears.

The country has proposed to use several funding mechanisms to clear the arrears.

These include utilization of the country’s special drawing rights from the IMF to repay 110 million dollars to the IMF, utilization of a bridge loan of 819 million dollars arranged by the African Export-Import Bank to repay 601 million dollars to the AFDB, and 218 million dollars to the World Bank’s International Development Association.

Zimbabwe would also utilize a long-term loan from a bilateral lender to repay the International Bank of Reconstruction and Development debt arrears amounting to 896 million dollars.
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Zimbabwe cabinet rejects proposal to cut salary for civil servants

HARARE Zimbabwe (Xinhua) -- Zimbabwe’s cabinet has rejected a proposal by finance minister to cut salaries and bonuses for civil servants as part of measures to contain a ballooning public sector wage bill gobbling 97 percent of state revenues.

Information Minister Christopher Mushowe said Wednesday the cabinet rejected the proposal in July and that Finance Minister Patrick Chinamasa disregarded this when he announced the measures while presenting the mid-term budget speech in parliament last week.

Among other measures, Chinamasa proposed a reduction in salaries and allowances for civil servants, taxation of allowances, suspension of bonuses for two years and retrenchment of 25,000 civil servants as part of cost-cutting measures to revitalize the economy.

Chinamasa also proposed to cut the number of embassies and consulates, a reduction in foreign allowances and to review class travel arrangements for senior government officials including ministers and legislators.

"The President and cabinet want to assure the civil servants, farmers and the public at large that these proposed measures are not friendly operative," Mushowe said.

Mushohwe said it was expected that the clarification would put to rest anxieties that may have arisen within the civil service, farming community and public at large.

Chinamasa warned that government could soon fail to raise enough money to pay salaries to its workers if urgent measures are not put in place to arrest ballooning expenditure.

According to Chinamasa, the measures were expected to reduce employment costs to around 60 percent of total revenue by 2019 from the current 97 percent.

Zimbabwe’s government is operating in a tight fiscal space marked by dwindling revenue inflows.

Economic growth forecast for 2016 has been cut to 1.2 percent from the initial 2.7 percent due to poor performance in agriculture, the mainstay of the economy.
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EARLIER REPORTS:

Grumblings in civil service as Zimbabwe moves to cut jobs and remuneration

HARARE Zimbabwe (Xinhua) -- Representatives of Zimbabwean civil servants will meet Wednesday to discuss the government’s announcement that it would cut jobs and tax the allowances of those in lower grades starting Oct. 1.

Finance and Economic Development Minister Patrick Chinamasa, in announcing the mid-term fiscal policy statement last week, said the taxing of allowances, together with reduction of workers by 25,000, would unlock more revenue for the cash-strapped government.

Chinamasa also announced the suspension of bonuses for 2016 and 2017, a move which civil servants will most likely find untenable because of their already low salaries.

Ministers and their deputies and more senior employers will also have to endure salary and allowances cuts of between 5 and 10 percent.

The minister said Cabinet had approved wage bill rationalization, which would reduce baseline public employment costs by around 118 million U.S. dollars by end of year.

Employment costs took 1.64 billion U.S. dollars—or 96.8 percent of revenue—during the first six months of the year.

A health worker who refused to be named said the taxing of allowances would hurt many people because they were not earning enough to sustain decent standards of living.

"Taxing our allowances is one and the same thing with reducing our salaries because our take-home will be lower," he complained.

President of the Zimbabwe Teachers Association Richard Gundane told state-run newspaper Herald that the general sentiment among workers was that the government decision was unacceptable.

"We have to make it clear to the government that we’re not accepting their decision to cut jobs, salaries and allowances for civil servants," he said.

Economist Clemence Machadu described the government’s decision as a prescription for slimming to death.

"The common thinking is that by cutting civil servants’ salaries and allowances by up to 20 percent and forgoing bonuses up to 2017, Government would save money."

"But the truth of the matter is that anything that tampers with the worker’s spending power, tampers with demand too, eventually tampering with production.

"It’s naive austerity," he told Xinhua.

He added that the action would further discourage the already low employee productivity and morale, and invite more demonstrations on top of the ones that had taken place in recent weeks.

Chinamasa is literally caught between a rock and a hard place and has to juggle between a huge labor force of 298,000 chewing up 96.8 percent of revenue and freeing more funds for social and infrastructure development against an underperforming economy.

Revenue projection to end of year has now been revised downwards from 3.85 billion dollars to 3.755 billion because of low revenue inflows.

The revenues underperformed by about 183.7 million dollars while expenditures were about 308.4 million between January and June.

Chinamasa said forgoing bonuses for the next two years would release 180 million dollars which would be used to alleviate the effects of the current devastating drought.

But Machadu said this was not good enough because the poorly paid civil servants would suffer more.

"But how do you solve drought by cutting an income of an average person, and are we going to have drought in 2017, since the 2017 bonus has also been forgone?"

While the ministers would also experience salary cuts, Machadu said more should have been done to make them spend less, including revising the type of motor vehicles they used.

He said he feared that some senior civil servants and ministers—now left without bonuses and with reduced salaries and allowances which are now being taxed as well—might lunge at government enterprises under their purview and siphon funds from there.
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Zimbabwe police issue new ban on public protests in capital

HARARE Zimbabwe (Xinhua) -- Zimbabwean police have issued a new ban on public demonstrations in capital Harare for a month after their recent ban was declared invalid by the High Court.

Officer Commanding Harare Central District Chief Superintendent Newbert Saunyama issued the prohibition order Tuesday.

The ban runs from Sept. 16 to October 15, 2016.

The new ban comes after the High Court last week declared invalid a two-week ban on public protests by police, arguing that it was unconstitutional and violated citizens’ rights.

Police had issued the ban following violent clashes between police and demonstrators last month.

The court challenge was mounted by opposition political parties working under the banner of National Electoral Reform Agenda who have previously organized anti-government protests to push for electoral reforms before the 2018 elections.

Zimbabwe government pays out U.S. $43 million U.S. dollars to evicted white farmers | Coastweek

HARARE Zimbabwe (Xinhua) -- Zimbabwean President Robert Mugabe attends a Zanu-PF party’s central committee meeting at party headquarter in Harare, capital of Zimbabwe. In his speech, Mugabe said that the civil unrest in Zimbabwe would not force him to step down or call early elections. XINHUA PHOTOS

Zimbabwe government pays out U.S. $43 million U.S. dollars to evicted white farmers

HARARE Zimbabwe (Xinhua) -- The Zimbabwean government has so far paid out 42.7 million U.S. dollars to former white commercial farmers who lost their land during the country’s on-going land reform program, an official has said.

The land reform program seeks to redistribute farms to formerly landless blacks.

The country embarked on the land reform program in 2000 to redress colonial land imbalances, resulting in a number of white farmers dying during violent seizures as they resisted being evicted during the early days.

Minister of Finance and Economic Development Patrick Chinamasa told Parliament during the presentation of the mid-term fiscal policy statement recently that the government was expediting mapping and valuation of improvements on the acquired farms for compensation purposes.

The European Union and the United Nations Development Programme have provided 7.8 million dollars for evaluation of the farms.

"To date, 42.7 million dollars has been paid out for 43 farms, notwithstanding fiscal constraints being faced by government," Chinamasa said.

Some of the farms had however been subdivided into smaller lots, thus raising the number of individual farms up for compensation.

In March, Lands and Rural Resettlement Minister Douglas Mombeshora said the government had fully paid compensation to 240 former white commercial farmers and partially compensated 17 others.

The government acquired more than 6,240 farms - approximately 14.5 million hectares - that belonged to the white commercial farmers whom it now seeks to compensate.

Zimbabwe government pays out U.S. $43 million U.S. dollars to evicted white farmers | Coastweek

HARARE Zimbabwe (Xinhua) -- Chinese Ambassador to Zimbabwe Huang Ping speaks during a ceremony to receive rice donated by China in Harare. Zimbabwe on Thursday received rice from China to help alleviate hunger after a drought that has left up to 4 million Zimbabweans in need of food aid. XINHUA PHOTOS - ZHANG YULIANG

China government donates rice to drought-hit Zimbabwe

HARARE Zimbabwe (Xinhua) -- Zimbabwe on Thursday received rice from China to help alleviate hunger after a drought that has left up to four million Zimbabweans in need of food aid.

Chinese Ambassador to Zimbabwe Huang Ping handed over 5,500 tonnes of rice that have arrived in the country, which is part of the total 19,000 tonnes worth 24.6 million U.S. dollars donated by the Chinese government to Zimbabwe.

In his remarks, Huang said the donation was in fulfillment of the drought relief pledge made to affected African countries by Chinese President Xi Jinping at the Forum on China-Africa Cooperation (FOCAC) summit held in South Africa last December.

"Today’s event again testifies the strong ties between China and Zimbabwe as all-weather partners, especially in the area of food security and agriculture," he said.

China had provided five consignments of emergency food aid to Zimbabwe over the last 10 years worth millions of U.S. dollars to help the country cope with food shortages, he added.

He said in support of Zimbabwe’s efforts to ensure national food security, China would this year donate 10,000 tonnes of urea fertilizer to benefit farmers who will take part in a government maize production scheme targeting to produce 2 million tonnes of maize.

Zimbabwean Minister of Public Service, Labor and Social Welfare Prisca Mupfumira, who received the rice on behalf of government, thanked China for the donation.

She said the rice would be distributed to vulnerable groups who include orphans and the elderly.

"The Government of Zimbabwe is indeed grateful for your donation as this will go a long way in alleviating food shortages among vulnerable groups," the minister said.

She said Zimbabwe would take long to recover from the impact of the El-Nino induced drought, and appealed for more humanitarian support to help the country cope with food shortages.

             

 

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