Gonos RBZ: an obstacle to aid

Biti was commenting on the Reserve Bank of Zimbabwe (RBZ) Amendment Bill, which is being debated in parliament, and told legislators that the central bank had to be reformed to give confidence to international donors and investors. The bank had become the major player in the economy, with its quasi-fiscal operations reaching to 35 percent of gross domestic product last year and at the same time accumulating a staggering $1.5 billion in debt last year alone. As long as it is in its current form, this will constrain the ability of this government to attract foreign direct investment and budgetary support. As I speak to you, we have failed to attract a single cent for budget support, said Biti.

The first thing that they (donors) ask is are you going to put our money through the central bank and I have no answer for that. The RBZ amendments are critical for the government to show Western donors that it is serious with reforming its economy that was ravaged by hyperinflation and disastrous policies by President Robert Mugabes previous administration.

The coalition government formed by Mugabe, Prime Minister Morgan Tsvangirai and Deputy Prime Minister Arthur Mutanbara last February has found it near impossible to raise the $10 billion it says it needs from donors for its economy to recover. In addition, the fragile coalition has been rocked by infighting over power sharing, with the MDC accusing Mugabe of refusing to appoint a new central bank governor and attorney general to fulfil last years political agreement.

Critics accuse RBZ governor Gideon Gono for printing money that fanned hyperinflation and left the local currency worthless and for quasi-fiscal operations that usurped the powers of treasury for driving Zimbabwes economy into the ground. But the amendments, which were approved by Cabinet and Parliaments legal committee, would clip Gonos powers by establishing an independent board and confine the bank to dealing with interest rates, currency management and regulating banks. The governors chief function would be to chair a newly created monetary policy committee. I want honourable members to understand that we have a genuine problem of honesty, credibility and accountability at the central bank. We are putting a full stop to the central banks quasi fiscal operations, Biti said.

Biti said the RBZ had accumulated $1.5 billion in foreign debt last year alone, a shocking figure when compared with the governments $4.7 billion external debt accumulated over 28 years. This year, the bank is accumulating $10 million in debt every month. Early this year, Gono admitted to raiding foreign currency accounts belonging to non-governmental organisations, exporters and individuals to fund government operations in 2008, including a controversial presidential election run-off. Debate on the bill was adjourned to Tuesday this week after Zanu (PF) legislators sought time to study Bitis comments. But Zanu (PF) lawmakers had planned to stall the bill as revenge for the Finance Ministers failure to increase their $100 monthly allowances.