Staff Reporter

Government has suspended payments for the procurement of goods and services in line Ministries and Departments accusing the suppliers of using parallel market exchange rates in settling their transactions.

Speaking through a statement yesterday, Secretary for the Ministry of Finance and Economic Development, George Guvamatanga highlighted that the line Ministries responsible for procurement are causing inflationary pressures due to their pricing system which uses the parallel market rates for their goods and services,.

“Treasury has noted with concern that line Ministries, Departments and Agencies (MDA`s) are submitting pay runs for the disbursement of cash for goods and services procured using parallel market exchange rates.

“As you are aware, such pricing framework by the suppliers of goods and services, have not only been causing inflationary pressures but also fuelling parallel market activities. This has resultantly caused instability in the foreign exchange market characterized by unnecessary movements on the rate resulting in exorbitant prices being charged,” said Guvamatanga.

Guvamatanga further said that this had also resulted in the erosion of MDA`s appropriated budgets hence, exerting pressure on Treasury by demanding more fiscal resources which are not aligned to the revenue inflows, thereby creating an inherent fiscal risk of unsustainable budget overruns and budget deficits.

He directed MDAs to rationalize their payment systems.

“Therefore, in line with the Public Finance Management Act [Chapter 22:9] which empowers Treasury to manage and control public resources, as well as determine the manner in which public resources are utilized, MDAs are being directed to rationalize their payment requests with a view of operating within the confines of the willing buyer willing seller foreign exchange rate,” said Guvamatanga.

Guvamatanga notified of his immediate suspension on all payments to MDAs as he waits the submission of reports on findings of the due diligence exercise on all running and future contracts.  He added that going forward, MDAs should seek Treasury approval on contract prices in order to ensure effective control in the utilization of public resources as guided by the PFM Act.

Guvamatanga again directed all MDAs to submit all payments to Treasury so that they could be signed off by the Accounting Officer ensuring value for money in procurement and confirming that the pricing framework is in line with Government policy.