News / Press Release
ZAPU says NO to government taking over RBZ Debt
23 Feb 2015 at 08:59hrs | Views
Amongst the big decisions facing this current parliament of Zimbabwe is whether the government should take over the $1,35billion debt owed by the Reserve Bank of Zimbabwe. For all concerned, this is a major decision because of the vast sums of money involved.
To put it into perspective, $1,35billion would be approximately one third of Zimbabwe's 2015 Budget. This accrues an interest rate of at least 10% plus per annum which is essentially something more than $135miillion. In short, this is not chicken feed money; this is an astonishing and significant amount of money, especially for a poor country like Zimbabwe. This money will be paid for generations to come, so it is important for the future generations to be clear about the debt they are paying, if they do agree to pay it.
The issue of the RBZ debt is not just about the size of the debt, but also about the matter of how it came about in the first place, and as an extension of this, it informs on the matter of the national debt which in itself amounted to $9billion on the last count in 2014.
Perhaps a good place to start is interrogating how the Reserve Bank of Zimbabwe accumulated this level of indebtedness and to whom the money is owed. The bulk of the debt was accumulated through raiding foreign currency accounts it held for private firms. The reasons given for the raids were that they were to support 'national' programmes at the height of the hyper-inflationary period. The funds were mainly used to bankroll what they called quasi-fiscal activities. The break-down of the parties owed monies is roughly as follows; institutional debt - $110 million, $80,2 million in central bank lines of credit, sovereign debt of $452, 6 million, and local debt of about $440 million. Even these amounts are queried because they include interest at rates that are neither clear nor transparent. The former deputy Governor of the RBZ Munyaradzi Kereke has gone to the extent of being public to query the debt of the Thomas Meikles chain with suggestions of collusion to inflate the figures between the present RBZ executives and the managers of the Meikles chain. We say, no stone should be left unturned in the quest for transparency. The government is taking people for granted by assuming that they will readily assume the debt without asking for accountability, independent forensic audit teams should be allowed to investigate how the debt came about first and those who benefitted as individuals or organisations should be forced to pay back the money.
The second area to explore is to question why it would be viewed as progressive to relieve the RBZ of this colossal debt. Well, the job of the RBZ pre-2009 went beyond just printing money, financial regulation and setting interest rates. The organisation played 2 important roles in the economy which was being banker to the government and being the lender of last resort to any banks in difficulty. It was considered the main instrument for maintaining economic stability in the country. The role of the RBZ as with similar institutions in other nations is central to economic growth and stability of the country. Freeing RBZ of this albatross of debt on its neck will empower the institution to re-establish its authority over economic stability instruments including being the lender of last resorts for the nation's commercial banks.
The third matter to interrogate is why it is not the right time for the government to take over the debt right now. The prime reason as alluded to by many in the past including the likes of the former minister of Finance Tendai Biti and academic Dr Brian Sedze is that the debt has never been adequately audited to determine whether it was indeed for the benefit of the nation or was it for the benefit of a few. Lessons must first be learnt about how the debt came about so that it doesn't happen again in the future and secondly, those who have benefitted from it must repay what they owe, and not expect the nation to carry the cross for the excesses.
As ZAPU we would propose the following matrix for transferring this debt from RBZ to the government:
-Trace all individuals and institutions that the RBZ owes money to and try to negotiate for the debts to be written off or at the very least, a patriotic interest rate be charged;
-Appoint external auditors from one of our neighbouring countries to audit all the 'national projects' the funds were used for and trace all the other beneficiaries of the funds borrowed from RBZ in order to recover what is recoverable;
-Publish a schedule of all beneficiaries of the funds in order for the public and foreign lenders to regain confidence in the transparency of RBZ going forward;
-Democratise the process by setting up a cross Party commission to determine what debts should be taken over by the government from RBZ by order of merit.
If this matrix is followed to the letter, it will at least conform to minimum standards of accountability and democracy which in turn will strengthen the nation's confidence in the RBZ. These are some of the positive steps we can take towards the block by block building of the Zimbabwean economy.
Whilst we accept that there are other permutations in resolving the matter of the RBZ debt, we believe ours to be the strongest in conforming to the principles of democracy and transparency.
To put it into perspective, $1,35billion would be approximately one third of Zimbabwe's 2015 Budget. This accrues an interest rate of at least 10% plus per annum which is essentially something more than $135miillion. In short, this is not chicken feed money; this is an astonishing and significant amount of money, especially for a poor country like Zimbabwe. This money will be paid for generations to come, so it is important for the future generations to be clear about the debt they are paying, if they do agree to pay it.
The issue of the RBZ debt is not just about the size of the debt, but also about the matter of how it came about in the first place, and as an extension of this, it informs on the matter of the national debt which in itself amounted to $9billion on the last count in 2014.
Perhaps a good place to start is interrogating how the Reserve Bank of Zimbabwe accumulated this level of indebtedness and to whom the money is owed. The bulk of the debt was accumulated through raiding foreign currency accounts it held for private firms. The reasons given for the raids were that they were to support 'national' programmes at the height of the hyper-inflationary period. The funds were mainly used to bankroll what they called quasi-fiscal activities. The break-down of the parties owed monies is roughly as follows; institutional debt - $110 million, $80,2 million in central bank lines of credit, sovereign debt of $452, 6 million, and local debt of about $440 million. Even these amounts are queried because they include interest at rates that are neither clear nor transparent. The former deputy Governor of the RBZ Munyaradzi Kereke has gone to the extent of being public to query the debt of the Thomas Meikles chain with suggestions of collusion to inflate the figures between the present RBZ executives and the managers of the Meikles chain. We say, no stone should be left unturned in the quest for transparency. The government is taking people for granted by assuming that they will readily assume the debt without asking for accountability, independent forensic audit teams should be allowed to investigate how the debt came about first and those who benefitted as individuals or organisations should be forced to pay back the money.
The second area to explore is to question why it would be viewed as progressive to relieve the RBZ of this colossal debt. Well, the job of the RBZ pre-2009 went beyond just printing money, financial regulation and setting interest rates. The organisation played 2 important roles in the economy which was being banker to the government and being the lender of last resort to any banks in difficulty. It was considered the main instrument for maintaining economic stability in the country. The role of the RBZ as with similar institutions in other nations is central to economic growth and stability of the country. Freeing RBZ of this albatross of debt on its neck will empower the institution to re-establish its authority over economic stability instruments including being the lender of last resorts for the nation's commercial banks.
The third matter to interrogate is why it is not the right time for the government to take over the debt right now. The prime reason as alluded to by many in the past including the likes of the former minister of Finance Tendai Biti and academic Dr Brian Sedze is that the debt has never been adequately audited to determine whether it was indeed for the benefit of the nation or was it for the benefit of a few. Lessons must first be learnt about how the debt came about so that it doesn't happen again in the future and secondly, those who have benefitted from it must repay what they owe, and not expect the nation to carry the cross for the excesses.
As ZAPU we would propose the following matrix for transferring this debt from RBZ to the government:
-Trace all individuals and institutions that the RBZ owes money to and try to negotiate for the debts to be written off or at the very least, a patriotic interest rate be charged;
-Appoint external auditors from one of our neighbouring countries to audit all the 'national projects' the funds were used for and trace all the other beneficiaries of the funds borrowed from RBZ in order to recover what is recoverable;
-Publish a schedule of all beneficiaries of the funds in order for the public and foreign lenders to regain confidence in the transparency of RBZ going forward;
-Democratise the process by setting up a cross Party commission to determine what debts should be taken over by the government from RBZ by order of merit.
If this matrix is followed to the letter, it will at least conform to minimum standards of accountability and democracy which in turn will strengthen the nation's confidence in the RBZ. These are some of the positive steps we can take towards the block by block building of the Zimbabwean economy.
Whilst we accept that there are other permutations in resolving the matter of the RBZ debt, we believe ours to be the strongest in conforming to the principles of democracy and transparency.
Source - Melusi Moyo.
