Reserve Bank governor warns against grants

Governor of the Reserve Bank of Zimbabwe, Gideon Gono, has warned the government against awarding grants to former liberation war activists, saying this would throw plans to reduce inflation off course. Inflation currently stands at 350 percent, which Gono hopes to slash to 150 percent by the end of December. When he was appointed governor in December last year, inflation had leapt to more than 600 percent. Thousands of people who were detained, restricted or imprisoned by Ian Smith's regime will receive money under the Ex-Political Prisoners, Detainees and Restrictees Bill, running into trillions of Zimbabwean dollars. The number of registered former prisoners jailed before independence is conservatively estimated to be below 10,000, but there are reports that former detainees who did not register with the association are now scrambling to register, which is expected to push the number of beneficiaries to 25,000. During his third-quarter review of monetary policy last week in Harare, the capital, Gono told businessmen: "The declining inflation rate should be bolstered through containment of expenditure levels to budgeted thresholds, avoidance of supplementary budgets and avoiding ... unplanned benevolent or gratuity payments that are unrelated to current production activities or real economic growth." In addition to awarding the proposed US $10 million once-off grant, beneficiaries will receive a monthly pension. A monthly survivor's or child pension will also be paid to the dependants of deceased former political prisoners. Economists said that while it was noble to reward the former activists for their role in the war of liberation, the economy was too fragile to withstand the pressure of doling out unbudgeted funds. The opposition Movement for Democratic Change said the move was a vote-buying gimmick by the ruling party, ahead of the elections in March 2005, a charge the government has denied. The government in 1997 had paid out hefty sums to war veterans - a move that was blamed for slowing down the country's economy. The economy took another knock the following year when the country was sucked into the vortex of the Democratic Republic of Congo civil war, followed by the fast-track land reform programme in 2002.