RBZ Debt Assumption Bill needs clear- headed approach

In compliance with section 141 of the constitution which obligates Parliament to consult concerned parties about draft legislation under consideration, the Parliamentary Portfolio Committee on Finance and Economic Development has been conducting public enquiries on the Reserve Bank of Zimbabwe (RBZ) Debt Assumption Bill. It came out clearly from the enquiries that the Bill is touchy. It is hoped that the heated debate around the bill will result in a refined Act of Parliament.

The Bill, which is meant to address the Central Bank's US$1.3 billion debt incurred prior to 31 December 2008, was gazetted in June this year. The spirit of the Bill is to have Government assume RBZ's debts so that it will focus on its core business of being a banker to the nation and lender of last resort to financial institutions. The Central bank has to start this journey on a clean balance sheet so as to create confidence within the financial sector.

The general pattern coming out of the public hearings denotes that people have some misgivings about the proposed act. Some people are opposed to the structure of the bill while others have reservations about the whole idea of having the treasury assume the RBZ debt.

The structural concerns mainly emanate from the creation of the Zimbabwe Debt Management Office in the Ministry of Finance and Economic Development. There is a general feeling that an independent body should be created to carry out the RBZ debt audit before the assumption of same by treasury.

The financial institutions are not convinced that the assumption of the debt by the cash strapped government will translate into timely payment, thus they need a legal assurance by way of factoring in provisions of time frame of payment within the bill.

The concern of this nature is not a big issue to a democratic government like ours. The government should not hesitate to address these concerns as it will show the public the magnitude of its commitment to transparency.

However, the biggest challenge emerging is the underhand that is manipulating the public hearings to settle personal vendetta. There are thinly veiled attacks on Dr Gideon Gono, the former Governor of the Central Bank. It was under his stewardship that RBZ accrued that debt. The country had gone into a serious economic meltdown and its survival depended solely on the ingenuity of the man whose head is about to be put on block.

Dr Gono did not wake up one morning and embarked on the quasi-fiscal activities. He had the blessing of his principal and the political leadership of the ruling party. The quasi-fiscal activities were a collective decision that was meant to bust the sanctions and indeed they played a significant role in dipping the effects of the illegal sanctions.

Only those who had anticipated that the sanctions would effect a regime change were and are still not happy with the quasi-fiscal activities and they will never forgive the chief architect. The same people have found a new avenue to rekindle their hatred on Dr Gono and vent their spleen during the public hearings. Ordinarily, these are the only people who can be expected to make the destructive noises on the quasi-fiscal operations.

However, a genuine concern comes from the way that government is set to raise the money if the bill becomes a law. The fear is that the load will be passed on to the already burdened tax payers. It's a painful fact that Zimbabweans are among the heavily taxed people and any additional tax burden on them will cause an outcry that some political sharks might exploit for political expediency.

The government must commission an independent RBZ Debt audit before taking over the liability. This audit will disclose the beneficiaries and the extent to which they have benefited. Hopefully the RBZ has the comprehensive record of the beneficiaries. To start with, these are the people who must pay.

It becomes very unfair for someone who didn't benefit at all to pay for things that profited individuals. The big chunk of the debt was accrued through the purchase of mechanisation equipment that was meant to improve productivity on the farms. The farm mechanisation scheme was on a rent-to-buy basis but very few beneficiaries have paid back a cent.

Some of the farmers got the equipment but never used it for the intended purposes. They sold the equipment and inputs for quick money. Government must aggressively pursue these beneficiaries and make sure the state money is recouped before thinking of taking over the liabilities. Strangely some of these beneficiaries are now richer than the Central bank itself.

How can a poorly salaried worker repay a loan for rich beneficiaries? A social impact evaluation can also establish the extent to which the ordinary worker benefited from the debt that they are to repay through taxes if the bill becomes a law.

After receiving the mechanised equipment and other inputs, some of the beneficiaries were very successful but never bothered to repay their loans. They instead bought state of range Sport Utility Vehicles (SUV). Government should only take over the shortfall.

The bill should be put on hold until the public concerns are addressed. There is a general belief that despite the widespread objection to the bill as reflected in the public hearings and other various platforms, parliament will nevertheless proceed to pass it. According to this school of thought, the parliamentarians and other senior government officials are the chief beneficiaries who are set to benefit by default if the bill is passed into a law.

Government should never be railroaded into taking this dangerous route. There are vultures out there waiting to seize such inviting opportunities and capitalise on them for their political mileage. Government should not adopt policies that give a lifeline to dead politicians.