Govt to fund Reserve Bank


Finance minister Tendai Biti yesterday set out a framework for the restoration of the Reserve Bank of Zimbabwe (RBZ), which should be achieved through debt restructuring and strengthening corporate governance at the central bank.
This is the first clear pronouncement by Biti on the revival of the Reserve Bank since his take over as Finance minister two years ago. Biti and RBZ governor have had a frosty relationship which appears to be thawing after the confirmation of Gono as RBZ board chair early this year.
The commitment yesterday to finance the ramshackle bank and retire its huge debt should pave the way to restore the central bank as a lender of last resort and build capacity in the institution’s monetary policy functions.
“A strengthened governance and accountability framework for the Reserve Bank provides a basis for restoring the bank’s credibility and integrity,” said Biti. “There can be no regeneration, revival and refocusing of this economy without a stable, functional, debt-free central bank.” Biti said following the appointment of the RBZ board and the enactment of the Reserve Bank Act — which has stripped the bank of quasi-fiscal activities — the focus was now on implementing governance reforms through restructuring and downsizing of the bank to align it to core functions under the multi-currency regime.
Present attempts to streamline the functions of the bank through retrenchments have hit a snag as the bank has no money to pay severance packages. Workers have threatened to take the bank to court for failure to honour salary obligations.
Biti said the envisaged reforms should address the indebtedness of the Reserve Bank estimated at about $1,5 billion. As part of the debt-retirement plan, government wants to hive off the debt from the bank through a special purpose vehicle with a view to appropriately settling proven claims from sale of assets, investment returns and allocated resources. This could entail a forensic audit on the bank, a measure which has been resisted by Gono’s allies in the inclusive government.
Lately companies owed million of dollars by the central bank have secured High Court orders to attach and auction property and agricultural implements. Government recently intervened to save the bank from more asset-stripping by creditors.
“The disposal of non-core assets shall employ a transparent process aimed at obtaining full market value of any such assets. Government will, therefore, be presenting the respective bill on restructuring of the Reserve Bank debt before this august House once we have gone through all the government internal processes,” said Biti.
On banks supervision and surveillance, a key function of the central bank, Biti said the rapid credit growth since the introduction of multi-currencies and the resultant high balance of payments deficit had increased banks’ vulnerabilities, which had the potential of causing a reduction in foreign assets.
“This development necessitates central bank to step up supervisory efforts in order to ensure that the banking system withstands the deterioration in the balance of payments position and the systemic risks stemming from The Reserve Bank is expected to announce a detailed outline of challenges facing the banking sector together with respective measures when Gono presents his Monetary Policy Statement soon.