"IN the second half of 2007, the Reserve Bank of Zimbabwe (RBZ) launched two special quasi-fiscal interventions with a view to initiate a positive supp..."
IN the second half of 2007, the Reserve Bank of Zimbabwe (RBZ) launched two special quasi-fiscal interventions with a view to initiate a positive supply response in the country’s manufacturing and agricultural sectors.
Under the two facilities known as the Basic Commodities Supply Side Intervention (BACOSSI) and the ASPEF, the central bank has released funds to targeted firms to produce a certain amount of goods to be sold at a gazetted price.
The 2008 CZI manufacturing survey, however, reveals that both initiatives have had little impact so far. If anything, they have only resulted in excessive monetary expansion and inflation.
According to the findings of the survey, despite receiving concessional financing, firms have not been able to produce goods on a “sustainable basis” owing to pricing distortions and a neglect of the value chain.
Pricing policies in Zimbabwe do not take into account re-ordering costs associated with hyperinflation. Conventionally known as “mark-up” and set according to the “rule of the thumb”, re-ordering margins are arguably the biggest drivers of inflation in the country.
Owing to pricing distortions, some firms were failing to resist the temptation to divert the money to non-productive investments that yield more profits.
The report also says notes that some of the beneficiary forms surveyed said the quasi-fiscal facilities tend to ignore the value chain leading to a breakdown in the input supply chain.