The Sunday Mail
In its quest to enforce fair pricing on all public works and supply contracts through value-for-money audits, Treasury is pushing for a downward review of prices of goods and services across the economy to entrench the current currency and exchange rate stability.
Finance and Economic Development Permanent Secretary Mr George Guvamatanga recently suspended payments on all public contracts and directed ministries, departments and agencies to revalidate invoices pegged using parallel market rates.
Government suppliers have been grossly inflating prices (forward pricing) to hedge against currency depreciation and inflation.
Government is the biggest procurer in the economy, as it spends about $50 billion per month on goods and services.
Mr Guvamatanga recently wrote to all public entities, expressing concern over line ministries, departments and agencies (MDAs) that were submitting pay runs for the disbursement of cash for goods and services procured using parallel market rates.
“As you are aware, such pricing frameworks by suppliers of goods and services have not only been causing inflationary pressures, but fuelling parallel market activities,” he said in the letter, which was also copied to Deputy Chief Secretary to the President Dr Martin Rushwaya, Auditor-General (AG) Mildred Chiri, Clerk of Parliament Mr Kennedy Chokuda and National Prosecuting Authority Administration Director Mr Admire Munowenyu.
Payments were suspended on all existing contracts submitted as at July 31, 2022.
In an interview last week, Mr Guvamatanga said the new approach to pricing for Government contracts was “a matter of going back to basics” and should not be exclusive to public contract pricing.
Price correction, he added, needed to happen “across the whole of the business world”, adding some retailers had already written to suppliers requesting adjustments, arguing the prices were no longer sustainable.
“It’s not a Government (only) thing. Pick n Pay needs to do it, OK (Zimbabwe) needs to do it, Spar (Zimbabwe) needs to do it, everyone needs to adjust.”
He said Treasury had resumed payments on all invoices that have complied with the new pricing regime.
Currently, 60 to 70 percent of normal payments, which are split between local and foreign currency, were being processed.
“The issue is not about the quantum of money; the issue is about the rate (at which the total price is arrived).”
Following the squeeze on excess liquidity, some taxpayers are reportedly asking the Government for permission to pay their quarterly obligations in foreign currency.
Mr Guvamatanga said the previous strong aggregate demand was artificial.
“The economy was overheating; everyone was overtrading and the majority of people who were reporting increased business activity were trading in foreign currency. Demand was artificial because everyone wanted to get rid of the Zimdollar,” he said.
“So, there is a readjustment that is required. Even Treasury has to readjust such that even our revenue, we must review it down.”
Economist Mr Persistence Gwanyanya said Government interventions were likely to usher in a permanent solution to the challenges facing the economy, especially exchange rate volatility and pressures on inflation.
“You go to the shops. Their prices are still high, but do you know what they have started doing now? Demand is penalising them; they are starting to adjust the prices. They are starting to write even to their suppliers. They are doing exactly what the Government did,” he said.
“What happened at Government level is now filtering down to the private sector.
“This is the relief that is coming; it’s a relief to the ordinary person. The economy would have to right-size; it will have to adjust to deal with the excess baggage. So, I feel sorry for the ordinary person, but I know what (good) is coming.”