Maravi

Conflicts emerge over bill on Zim’s central bank operations

Conflicts emerge over bill on Zim’s central bank operations
By Kingsley Kaswende in Harare, Zimbabwe
Fri 20 Nov. 2009, 04:00 CAT

CONFLICTS have emerged between ZANU-PF and MDC over a parliamentary bill that seeks to reform the country’s central bank operations.

The Reserve Bank of Zimbabwe (RBZ) Bill, which entered its second reading on Tuesday, should theoretically reduce the powers of the central bank governor, which has been a major pre-occupation of MDC, and has been a source of an abrasive relationship between the two parties in the inclusive government.

RBZ governor Gideon Gono, whom the MDC wants removed, has been widely accused of causing hyper-inflation over the past few years by increasing money supply because of printing money for quasi-fiscal and politically-linked activities.

However, he blames the hyper-inflation on financial sanctions by donors that the country has faced over the years.

According to the RBZ Bill, the governor’s powers will be reduced by appointing an independent chairperson and board for the bank.

During the second reading of the bill on Tuesday this week, finance minister Tendai Biti said the bill’s main purpose included the need to refocus the bank to core functions, especially financial-sector supervision and payment systems.

Biti said he was introducing the Bill after extensive consultations with stakeholders including the Southern African Development Community (SADC), the World Bank, International Monetary Fund (IMF), Law Society of Zimbabwe and the bank itself.

He said the bill, which borrowed from legislation from Uganda, Georgia and South Africa, among other countries, was a "progeny of extensive work" by Cabinet and the cabinet committee on legislation chaired by justice minister Patrick Chinamasa.

He said it was "motivated by national interest and not any personal conflicts or subjective idiosyncrasies".

"The RBZ has for the past four years become a major economic player through quasi-fiscal activities. The bank easily overtook Treasury as the major fiscal player," Biti said. "Some activities financed by the bank included election-related expenses, transfers to parastatals, subsidised direct lending, below-cost provision of equipment and fertilisers to farmers and allocation of foreign currency at subsidised exchange rates. For all intents and purposes the bank became the government while the government became an onlooker."

Biti said quasi-fiscal activities fuelled hyperinflation and ruined the economy.
He said while Gono justified the quasi-fiscal activities by citing extraordinary circumstances which needed extraordinary interventions and measures, there was a misinterpretation of the law to justify these actions.

Biti said although Gono was acting under instructions from his superiors, his activities could not be justified under the law.

Biti said it was important to pass his sweeping amendments to the law.

ZANU-PF legislators have threatened, and this week actually attempted, to block the bill arguing that it was there for MDC to settle personal scores with Gono.

ZANU-PF chief whip Joram Gumbo clearly said the ZANU-PF Parliamentary caucus had decided to oppose the Bill in its present form, and he told Biti in the House of Assembly that he would have to agree to changes if he wanted the Bill to be supported by ZANU-PF.

However, an agreement was reached between MDC and the ZANU-PF lawmakers to make changes to the bill, according to Paul Mangwana, a ZANU-PF member of the parliamentary legal committee.
"There have been extreme discussions with the Minister Biti that there be amendments to the current bill... and we have agreed on these amendments,” Mangwana said.

Although the bill may be passed in the House of Assembly where ZANU-PF and the MDC are almost balanced in representation even without the changes that ZANU-PF is calling for, the bill may find it difficult to be passed by the Senate, where ZANU-PF has a majority to block it.

Labels: GIDEON GONO, MDC, NEOCOLONIALISM, RBZ, TENDAI BITI

posted by MrK @ 9:13 AM