Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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RBZ ‘not worried by court order’

RBZ ‘not worried by court order’

Sunday, 09 June 2013 16:51

HARARE – Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono says they are 
not panicking over a High Court decision ordering the central bank to 
reimburse millions of dollars it withdrew from a local company at the height 
of the country’s economic meltdown in 2007.

Last week, the High Court ordered the central bank return to Trojan Nickel 
Mine Limited (Trojan) bank account, over $1 million it owes the mining 

But Gono insists all is in order.

“We are not losing sleep over the matter. The funds were not used by the 
central bank, but it was something that we had to do to keep the country 
going,” Gono told the Daily News on Sunday last week on the sidelines of an 
International Monetary Fund (IMF) function.

The seizure of the funds followed a monetary policy statement issued by the 
RBZ in October 2007 centralising all foreign currency accounts and directing 
the lodgement, at its doorsteps within 24 hours, of all corporate foreign 
currency balances held by authorised dealers.

This was part of efforts to stem the imminent collapse of the economy, which 
had suffered from years of economic misuse and bad policies by the then Zanu 
PF-led government. The centralised order saw authorised dealers of foreign 
currency being forced to hand over their clients’ money to the RBZ.

While the RBZ insisted that it had no legal relationship with corporates and 
individuals who remitted their money to the central bank, from which 
liability could arise, the High Court last Thursday ruled in favour of the 
mining firm.

Gono said the central bank will soon be issuing a comprehensive response to 
the High Court ruling.

Economist Christopher Mugaga said the apex bank — which has been trying to 
distance itself from the claims, arguing that it had no legal relationship 
with either companies or individuals who unwittingly funded Zanu PF during 
that time — has no capacity to pay back.

“Remember about 95 percent of domestic debt originated from RBZ’s activities 
prior to dollarisation and the ruling is simply null and void considering 
the bank’s failure even to pay its former employees their retrenchment 
packages,” he said.

Mugaga said it will be difficult for other companies, which are owed by the 
financial institution, to fight it “considering the apex bank has unfettered 
control over exchange control regulations which will make doing business 
difficult for the aggrieved firm”.

Another economist John Robertson concurred with Mugaga.

“The amounts seized by the RBZ total more than a billion dollars, and a 
great many of the other companies and individuals are going to lodge a claim 
with the precedent of this case being used. It will lead to more anxiety and 
frustration rather than settlements.

“There will be a great many people still waiting for settlement in six 
months’ time,” Robertson said.

Other political analysts however, contend that Gono’s confidence stems from 
the fact that Treasury and RBZ have agreed on a draft bill that will enable 
government to take over the Central Bank’s $1,1 billion debt.

The takeover of the debt is the last leg of reforms at RBZ that began in 
2009, when it was ordered to stop engaging in quasi-fiscal activities blamed 
for quickening Zimbabwe’s hyperinflation.

Finance minister, Tendai Biti recently said he would soon take the draft 
Debt  Assumption Bill to Cabinet.

“The bill creates a Special Purpose Vehicle, where the RBZ debt will be 
housed,” Biti said.

RBZ owes $80,2 million in central bank lines of credit, has a non-resident 
sovereign debt of $452,6 million, non-resident institutional debt $110 
million and domestic debt (bank/deposits) of $439 million.

The RBZ contends that it is also owed $1,5 billion by government, when it 
engaged in quasi-fiscal activities to finance critical needs such as funding 
elections, sustaining parastatals and financing the farm mechanisation 
exercise, among others.

The assumption of the RBZ debt is a recommendation by the International 
Monetary Fund (IMF), which argued that the bank’s balance sheet needed to be 
freed of debt.

In the Article IV consultation report last year, IMF said the debt was 
constraining the bank’s ability to undertake liquidity provision and 
distracts it from focusing on its core functions.

“Proposed modifications to the RBZ debt relief bill will focus on 
transferring the liabilities from RBZ’s balance sheet to a fund managed by 
the Finance ministry,” IMF said.

“While this is a less balanced approach than the comprehensive balance sheet 
bifurcation [splitting] recommended by Fund TA (Technical Assistance) 
missions, it remains consistent with the objective of restructuring the RBZ 
balance sheet.”

The central bank has also proposed to dispose of its non-core assets to help 
clear some of its debts.

However, the process has moved at a snail’s pace, two years after the RBZ 
invited bids for the non-core assets.

In 2010, government had to invoke the Presidential Powers (Temporary 
Measures) Act, to protect the RBZ’s assets from being attached by various 
creditors after obtaining writs of executions.

The creditors included those that supplied implements for the farm 
mechanisation programme. – John Kachembere


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