Finance and Economic Development Minister Professor Mthuli Ncube has said economic policies put in place by Government are sound but the economy was being sabotaged.
The minister said it was unsustainable to allow the black market to lead foreign currency trading hence Government introduced the forex auction system.
Minister Ncube told senators during Thursday’s Senate Question and Answer session that the currency auction system is meant to bring price stability.
“We are doing various things. Firstly, we have increased civil servants’ salaries by 50 percent and this is a temporary cushion while the normal adjustment is taking place as we speak. It is on the table. We have also added an allowance which is the US$75 for all the civil servants and again, that is meant to be an inflation protector during this difficult time,” he said.
“That is what we are doing but the negotiations on salaries are going on as we speak. This is just a gesture from the employer to the employee to cushion them against vagaries of inflation. To be clear, the saboteurs are the people in the parallel market and not the policies.”
He said Government was addressing civil servants’ welfare through various cushioning measures while salary negotiations were in progress. “The intention is to give leadership to the market and then stabilise the market in the process. Once the market is stable, the movement of prices will also be curtailed thereby slowing down inflation. That is really the intention of the auction system, to give better price discovery,” said Prof Ncube.
He said Government was prioritising the productive sectors in its forex allocations.
Prof Ncube said people have been allowed to buy using foreign currency as part of measures to allow forex to circulate in the formal system thereby easing pressure on the local currency as well.
“We allowed it during this Covid-19 period for two reasons. First, to give consumers and citizenry flexibility when they go about shopping and paying for goods and services and secondly, as a way to manage money supply growth by allowing into circulation and transaction activity what you already have in your pockets,” said Prof Ncube.