(TALKZIMBABWE) Text: Gono responds to Mutambara

Text: Gono responds to Mutambara
Our reporter
Mon, 23 Feb 2009 15:00:00 +0000

BELOW is a statement released by the Reserve Bank Governor, Dr Gideon Gono in response to a statement by the Deputy Prime Minister calling on stakeholders in the country to ignore the central bank's Monetary Policy Statement issued on 2 February, 2009.

The following statement clarifies the "facts and legal correct position" of the RBZ activities and the role of the Governor.

FULL TEXT

CLARIFICATION OF THE LEGAL STATUS OF MONETARY POLICY STATEMENT ISSUED BY RESERVE BANK OF ZIMBABWE GOVERNOR ON 2 FEBRUARY, 2009.
BY DR G. GONO
GOVERNOR: RESERVE BANK OF ZIMBABWE
20 FEBRUARY 2009

1. INTRODUCTION AND BACKGROUND

1.1 The Reserve Bank of Zimbabwe has, today, the 20th of February, 2009 been inundated with desperate calls from Stakeholders pertaining to the legal standing of the recently announced Monetary Policy Statement, that the Bank issued on 2 February, 2009.

1.2 Farmers have called, desperately seeking clarification if the announced policy of liberalizing the marketing of farm produce in line with purchasing power parity prices, payable in foreign exchange still stands. One Mvurwi farmer called already making a “U-turn” with his sugar beans.

1.3 Some banks have telephoned in demanding that they be refunded the statutory reserves they had paid, following the reported nullification of the Monetary Policy Statement by certain Authorities outside the Reserve Bank.

1.4 Gold producers have telephoned, fearing that there was going to be policy reversals on the recent move to allow gold mines to freely trade their physical gold.

1.5 Some exporters have telephoned desperately concerned that Government was going to reverse the liberalization of the exchange rate.

1.6 Others called fearing that the allowance for the co-circulation of multiple currencies would be reversed.

1.7 Cooperating regional and international financiers who had offered lines of credit of around US$500 million on the back of the recent policy liberalization have also telephoned in seeking clarification on the correct position, following the conflicting signals that are alleged to be coming from some authorities in
Government.

1.8 These sentiments by our creditors, if unchecked, risk protracting the current macroeconomic instabilities through unintended consequences of worsening our limited foreign currency supplies.

1.9 Importers of basic goods have also telephoned, confused about whether or not the duty free status of basic commodities is the correct position, following the alleged nullification of recent policy measures.

1.10 Quite clearly, therefore, the reported alleged nullification of the recent Monetary Policy Statement has unfortunately unsettled the market, at a time when we should be working for the return of macroeconomic stability.

2. FACTS AND THE LEGAL AND CORRECT POSITION

2.1 As Governor, I wish to set the record straight by first highlighting the following imperatives:

(a) That the Reserve Bank of Zimbabwe is a juristic person, created by the legitimate statutes as espoused in the Reserve Bank of Zimbabwe Act Chapter 22:15;
(b) According to the Reserve Bank of Zimbabwe Act, itself a legitimate product of the democratic and constitutional processes of the Republic of Zimbabwe, the core functions of the Reserve Bank of Zimbabwe are:

WHAT THE RESERVE BANK OF ZIMBABWE ACT SAYS

1.1. In terms of section 6 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] the principal functions of the Reserve Bank are:-

(a) to regulate Zimbabwe’s monetary system;
(b) to achieve and maintain the stability of the Zimbabwe dollar;
(c) to foster the liquidity, solvency, stability and proper functioning of Zimbabwe’s financial system;
(d) to advance the general economic policies of the Government;
(e) to supervise banking institutions and to promote the smooth operation of the payment system;
(f) to formulate and execute the monetary policy of Zimbabwe.

1.2 The other functions include:-

(a) acting as banker and financial adviser to, and fiscal agent of, the State;

(b) acting as lender of last resort for banking institutions;

(c) whenever appropriate, representing the interests of Zimbabwe in international or intergovernmental meetings, multilateral agencies and other organisations in matters concerning monetary policy; and

(i) providing banking services for the benefit of:
(i) foreign governments; and
(ii) foreign central banks or other monetary authorities; and
(iii) international organisations of which Zimbabwe is a party; and
(j) participating in international organisations whose objective is to pursue financial and economic stability through international monetary co-operation; and
(k) undertaking responsibilities and performing transactions concerning the State’s participation in or membership of international organisations; and
(l) exercising any functions conferred or imposed upon it by or in terms of any other enactment.

(c) Further, the operations of the Reserve Bank are informed and guided by other secondary statutes that govern the operations of the financial sector in general.

2.2 Against this background, therefore, the Reserve Bank of Zimbabwe wishes to advise all Stakeholders locally, regionally and internationally that the Monetary Policy Statement as announced on 2 February, 2009 does constitute the legitimate policy position in the affairs of Monetary Policy Management of the Country.

2.3 Stakeholders, particularly the Banking Sector players are, therefore, called upon to ensure that they do not break the standing legitimate statutory requirements as is set in the Zimbabwean laws.

2.4 Doing otherwise, for whatever reason, or based on pronouncements radiated at variance with the dictates of the law will leave the relevant banking institutions, individuals or corporates in needless breach of standing legitimate regulations and laws.

2.5 As a Nation, let us, therefore, discourage the temptation of deliberately causing disruptive confusions through breaking of the law, or inadverted abuse of our various standings in society.

3. FORMATION OF MONETARY POLICY

3.1 I wish to also highlight to Stakeholders and at the same time educate those who may not be aware, that before the Governor delivers the statutory Monetary Policy Statements, he first consults widely and takes into account the policy advice and recommendations from industry, mining, consumers, labour unions, civic groups, political formations, the clergy, regional bodies such as SADC, as well as other centers of excellence globally, such as the IMF and the World Bank, among several others.

3.2 The Monetary Policy formulation process, therefore, incorporates the wisdom and advice from a rich representation of stakeholders.

3.3 By its nature, advice will need to be taken in the context of the broader economy-wide issues, such that inevitably, no single word of wisdom would be seen overshadowing what is deemed to be consistent with the requirements of the economy at large.

4. THE ALLEGED POLICY NULLIFICATION

4.1 As we work to stabilize the National economy, we advise our Principals in the field of politics to carefully weigh their pronouncements, particularly in technical areas such as banking and finance that risk destabilizing the economy.

4.2 Ordinarily, where there is room for policy enhancement, such enhancements must be done in an orderly and professional manner, with the singular objective of being constructive in the public interest, as opposed the deliberately engaging in destructive pronouncements.

4.3 Doing so would not take us forward as a Nation.

4.4 Where past policies need improvement, let us work to improve on them.

4.5 Where recent policy measures brought relief to industry and consumers, let us support the positives and consolidate the gains from such developments, as opposed to the careless throwing of blanket statements that cloud business certainty.

5. THE OUTLOOK

5.1 As Monetary Authorities, we are confident that the outlook period remains very positive.

5.2 As a Nation, it is imperative that we elevate our engagements with the greatest level of responsibility, knowing what we mean by mutual respect for the laws and statutes we would have created, and the need for legitimate institutions to be allowed to fully discharge their statutory mandate.

5.3 As a Central Bank, we will vigorously pursue the deliverables that are spelt out in the statutes that govern the Central Bank’s operations.

5.4 We are very pleased that the ushering in of the inclusive Government has now made it possible for the different arms of the Government and Public Institutions to now go back to serious work, freeing the Reserve Bank to return to its core functions.

5.5 My Team and I have all the confidence that with everyone and every institution doing what they are supposed to be doing, there will be no need for the Reserve Bank to be extending into other stakeholders’ areas of responsibility.

5.6 Similarly also, it is the minimum expectations that other stakeholders allow the Central Bank to operate in those areas of competency designated to it by the legitimate laws of the Land.

5.7 Through this mutual recognition of institutional rights and obligations, there is bound to be goal congruency, unity of purpose, policy consistency, and the distinction of National interests from tactical political maneuverings.

5.8 Above all, as Zimbabweans, let us speak the language of National Healing, Unity of Purpose and Hardwork.

5.9 Engaging in needless brawls, either as a way of proving the mightier among ourselves, or as a result of ill-advice from those around us should be avoided in the National interest.

5.10 As diverse as humanity has been, is, and will always be, there has been, there is and shall forever always be differences of personalities, temperaments and opinions.

5.11 We must not allow these permanent traces of humanity to stand in the way of progressive and professional engagement.

5.12 Let us, therefore, rise above selfish, sectoral or political considerations in the interest of the common goal of advancing the interests of our Motherland Zimbabwe.

5.13 Any changes or modifications that may come can only improve on the current status as announced by the Governor and until such time that the intended modifications are announced through the legal and formal processes, stakeholders should remain guided by what is in place and avoid unnecessary panicking.

5.14 A key component of the new roadmap is certainty and predictability of announced policies, minimal policy shifts and reversals, consistency between policy announcements and action on the ground, respect for legal agreements and respect for private property, among other desirables.

5.15 As already in the recent Monetary Policy Statement, the Reserve Bank as Monetary Authorities will and is already confining itself to core business as defined and spelt out in the enabling statutes hence this states hence this statement is issued to clarify the position in line with its mandate in the field of Monetary Policy, Exchange Control administration and related matters without seeking to contradict any authority or stakeholder.

5.16 Please be guided accordingly.

Thank you.

DR G. GONO
GOVERNOR
RESERVE BANK OF ZIMBABWE
20 February 2009