Biti seeks sweeping RBZ reforms
Finance Minister Tendai Biti has finalised work on proposed amendments to the Reserve Bank of Zimbabwe Act which will see a non-executive director taking over as chairperson of the central bank board.
The amendments are aimed at ensuring the bank reverts to its core function of price and financial sector stability and stops quasi-fiscal operations that saw inflation reaching 231 million percent.
However evidence of more quasi-fiscal operations by the RBZ have resurfaced.
Court documents seen by The Standard show that a company registered in the British Virgin Islands has approached the High Court to force the RBZ to pay it almost US$5 million for buses it delivered to the central bank only late last year.
The RBZ ordered 1 000 Swaraj (model ZT54-D-ELWB) buses from Alshams Global Limited, linked to local businessman Jayesh Shar of Gift Investments Ltd on May 23.
Information contained in court documents show that by November 24, Alshams, which had delivered 89 buses was forced to stop its deliveries after the bank failed to pay.
Alshams has hired lawyers Atherstone & Cook in its bid to recover US$ 4 580 162.50. It is also claiming interest from the central bank.
It remains unclear if the RBZ whose head Governor Gideon Gono is fighting a turf war with Biti, is opposing the application.
Gono, who has been under fire for the past few weeks for spearheading quasi-fiscal operations, has removed his gloves in his fight against Biti. He alleged last week that Biti was pursuing a personal vendetta against him.
The Finance Minister has however denied the allegations insisting he is simply fulfilling a mandate set by the inclusive government, charged with reviving the economy among other things.
Sources told The Standard Gono’s campaign had not distracted Biti from his quest to reform the central bank. They said he had finalised work on the principles of the Reserve Bank of Zimbabwe Amendment Bill 2009.
The amendments are aimed at addressing corporate governance issues at the RBZ which is not financially sound.
The bank’s indebtedness to local and international bodies is in excess of US$1 billion.
It holds no reserves, yet its gold and foreign assets must be around 40% of its liabilities. Experts say this compromises the RBZ’s position as the lender of last resort.
Biti wants Section 6 of the Act to be revisited so there is a clear demarcation between functions of the government and those of the bank. The amendments will ensure that the bank never embarks on quasi-fiscal operations again.
Biti considers the digressions by the bank from its core function resulted from inadequate supervision by the board. He believes the current structure does not provide for the separation of powers between the Governor and the board.
Biti proposes that the Governor no longer chairs the board. He wants a non-executive director to take over the leadership of the board which should have a minimum of five but not more than seven directors.
Like in most banks in East and Southern Africa, the Secretary for Finance will become one of the board members. Biti believes that the inclusion of the Secretary for Finance on the board will enable fiscal and monetary policies to be complementary of each other.
The RBZ Act will have to be amended to ensure that a Monetary Policy Committee (MPC) is established. The MPC would be chaired by the Governor who, however would not do as he pleases.
Section 20 of the RBZ Act would have to be amended to ensure that the Governor carries out his work in compliance with the board’s directives.
The bank’s deputy governors will be removed from the board and be part of the MPC. The board will have a supervisory role but would leave technical matters to the MPC.
Biti believes this arrangement is enough to ensure separation of powers between policy makers and implementers.
Biti also wants, in line with Section 29 of the RBZ Act, to establish the audit, loans review, human resources, assets and liabilities and risk management committees. These committees would strengthen the board’s policy oversight role on the bank’s activities.
In order to avoid scenarios where the bank exposes the government to huge debt, the bank would need express approval from the Minister and Parliament before it contracts any obligations.
Biti also wants the Minister of Finance to have powers to make regulations prescribing circumstances in which foreign currency may be used as legal tender. He also wants the bank to ensure foreign reserves are 40% of its liabilities.
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-The Standard
Posted by Wellington Chadehumbe
on May 27, 2009. Filed under Local News,Main Headline.
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