FINANCE MINISTER Tendai Biti

HARARE – Zimbabwe Finance Minister Tendai Biti said on Tuesday the government was failing to attract badly needed funding for next year’s budget from foreign donors because they feared that without far reaching reforms at the central bank, their money would be misused.

Biti was commenting on the Reserve Bank of Zimbabwe (RBZ) Amendment Bill, which is being debated in parliament, and told legislators that the central bank had to be reformed to give confidence to international donors and investors.

The bank had become the major player in the economy, with its quasi-fiscal operations reaching to 35 percent of gross domestic product last year and at the same time accumulating a staggering $1.5 billion in debt last year alone.

“As long as it is in its current form, this will constrain the ability of this government to attract foreign direct investment and budgetary support. As I speak to you, we have failed to attract a single cent for budget support,” said Biti.

“The first thing that they (donors) ask is ‘are you going to put our money through the central bank’ and I have no answer for that.”

The RBZ amendments are critical for the government to show Western donors that it is serious with reforming its economy that was ravaged by hyperinflation and disastrous policies by President Robert Mugabe’s previous administration.

A unity government formed by Mugabe and Prime Minister Morgan Tsvangirai in February has found it near impossible to raise the $10 billion it says it needs from donors for its economy to recover.

In addition, the fragile coalition has been rocked by infighting over power sharing, with the MDC accusing Mugabe of refusing to appoint a new central bank governor and attorney general to fulfil last year’s political agreement.

Critics accuse RBZ governor Gideon Gono for printing money that fanned hyperinflation and left the local currency worthless and for quasi-fiscal operations that usurped the powers of treasury for driving Zimbabwe’s economy into the ground.

But the amendments, which were approved by Cabinet and Parliament’s legal committee, would clip Gono’s powers by establishing an independent board and confine the bank to dealing with interest rates, currency management and regulating banks.

The governor’s chief function would be to chair a newly created monetary policy committee.

“I want honourable members to understand that we have a genuine problem of honesty, credibility and accountability at the central bank. We are putting a full stop to the central bank’s quasi fiscal operations,” Biti said.

Biti said the RBZ had accumulated $1.5 billion in foreign debt last year alone, a shocking figure when compared with the government’s $4.7 billion external debt accumulated over 28 years.

This year, the bank is accumulating $10 million in debt every month.

Early this year, Gono admitted to raiding foreign currency accounts belonging to non-governmental organisations, exporters and individuals to fund government operations in 2008, including a controversial presidential election run-off.

“That is unfortunate as it is unacceptable. There is obviously no oversight function at the central bank,” Biti said.

Debate on the bill was adjourned to next Tuesday after ZANU PF legislators sought time to study Biti’s comments. But ZANU PF lawmakers had planned to stall the bill as revenge for the Finance Minister’s failure to increase their $100 monthly allowances. – ZimOnline.