GOVERNMENT needs to come up with a clear accountability framework for the Sovereign Wealth Fund proposed in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, a World Bank representative said.Addressing delegates at a consultative meeting in Harare last week, World Bank Director for Poverty Reduction and Economic Management in Africa Mr Marcelo Giugale said the idea of a Sovereign Wealth Fund was a good one if handled properly.
“Government should prioritise putting frameworks in place.
“There is need for a strong fiscal framework, a balanced budget and a transparency and accountability framework so that people know what is happening,” he said.
Zim Asset states that the creation of the fund would provide predictability and sustainability to Government’s innovative funding from domestic resources which are readily available.
The Sovereign Wealth Fund Bill was recently approved by Cabinet and is expected to be brought before Parliament soon.
The enactment of the Bill will make the Fund the ninth such facility in Africa after Algeria, Angola, Botswana, Equatorial Guinea, Gabon, Libya, Mauritania and South Africa .
Mr Giugale said countries that had established the fund successfully are the ones that had well-documented frameworks.
“The principle that I think works well is to treat the natural resources as if they belong to your children not to you. The funds put aside are not used for luxuries for yourselves but are used to better the lives of the future generations. This works in households as well as nations,” he said.
He said the key lay in how the budget is put together, particularly how the price projections for the natural resources are determined.
“If you are conservative with your projections, then you are pleasantly surprised when more money comes in than you had put in the budget and you have extra money to put aside.
“But if you are too optimistic in your price projections and it turns out to be less, then the revenue coming in is less and you accumulate nothing,” he said.
Mr Giugale added that projections of commodity price were very important which is why some successful countries completely delegate the price projection to independent experts who are dedicated to that.
He said although the Zimbabwean economy was facing challenges, it could benefit from the high commodity prices on the market.