Zim central bank operations illegal: Biti

HARARE – Zimbabwe’s central bank has been operating outside the law, in the process undermining and weakening the country’s banking and financial system, according to Finance Minister Tendai Biti.

Biti – who said as a result of illegal activities of the central bank most of Zimbabwe’s banks would fail a distress test – said a team from the International Monetary Fund (IMF) that arrived in Harare on Monday would review the operations of the Reserve Bank of Zimbabwe (RBZ) and recommend reforms needed to restore credibility to the central bank.
‘The RBZ has been operating outside the law,’ Biti told reporters in Harare on Monday night.
‘Our challenge is to make the RBZ a credible institution consistent with best practices . . . their (IMF) terms of reference are centred on the credibility of the RBZ,’ said Biti, adding that he would soon propose legislative changes to bring RBZ operations in line with the functions of a central bank.
The IMF team, whose visit to Harare comes two weeks after the fund’s board lifted a ban on technical assistance to Zimbabwe, will stay in the country until May 29 during which it will assess the banking system, the national payments system, examine the RBZ’s balance sheet and recommend governance reforms needed at the central bank.
In a statement released by the IMF before dispatching its team of experts to Harare, the Fund called for an independent audit of the RBZ, saying this was necessary to enhance the credibility of the country’s economic turn around programme and also to help attract donor support for the unity government of President Robert Mugabe and Prime Minister Morgan Tsvangirai.
Among concerns key Western donor governments want addressed before they can support the unity government is reform at the central bank where governor Gideon Gono is accused of stoking up the country’s economic meltdown through quasi-fiscal activities, including funding Mugabe’s political programmes.
Gono has also come under fire for printing money to fund activities ordinarily undertaken by government ministries through allocations from the national budget.
Meanwhile Biti said the government was making progress in its efforts to raise budgetary support from donor countries and international institutions but declined to say exactly how much the administration had been promised and by who, saying such details would be released through Tsvangirai’s office.
‘We are making strides on BOP (balance-of-payments support). We are talking big figures here but I think we will be making an announcement through the Prime Minister’s office,’ he said.
There has been a trickle in recent weeks of donor funds to Harare mostly targeted at specific humanitarian needs. For example, Germany this week announced a Euro10 million (about US$13 million) financial package for Zimbabwe most of which Berlin said would go to improving water treatment facilities to prevent recurrence of cholera, while the World Bank announced on Monday that it would provide US$22 million in grant money to Zimbabwe in the next few weeks.
However, the IMF has made it clear it will not resume balance-of-payments support to Zimbabwe until Harare clears outstanding arrears of about US$133 million. The IMF stance will influence other donors and multilateral funders, who take a cue from the institution, to also withhold any substantial financial support to Zimbabwe.
-ZimOnline