Published by the government of Zimbabwe
11 November 2009
Harare — THE Reserve Bank Amendment Bill which seeks to limit the functions of the Reserve Bank of Zimbabwe to core business and bring the powers of the governor under the control of a board was read for the second time in the House of Assembly yesterday.
In his second reading speech, Finance Minister Tendai Biti described the proposed legislation as a "firefighting Bill" and a transitional regulation, as members of the public would be asked what the central bank should be like during the forthcoming constitution-making process.
This, he said, would be captured in the country's supreme law.
Minister Biti said the Bill, whose debate was deferred to next Tuesday, had gone through an extensive interrogation in Cabinet, adding that the proposed law was motivated by the national interest.
"The amendments are consistent with the best practices in other countries like Uganda, Georgia and South Africa. At the core of the proposed amendment is the restoration of confidence in the central bank, which confidence is non-existent at the moment," said Minister Biti.
"The central bank of any country or a developing state must be dependable and people should have confidence. People's confidence will be eroded when they fear that their money will be stolen."
He said the Bill seeks to ensure that the central bank focuses on its core business, which is monetary policy formulation, stabilising the local currency and supervision of financial institutions.
The minister chronicled quasi-fiscal activities that he said the central bank had been carrying out since 2005, which he said constituted about 30 percent of the Gross Domestic Product.
He said this had resulted in broad money supply reaching 1 000 percent of GDP.
Minister Biti said due to the quasi-fiscal activities, the central bank had accrued debts of US$1,5 billion in about three years yet the country had accrued debt of only US4,7 billion in 28 years.
"The RBZ was never created to contract loans; the contraction of loans was not because of the absence of the law, but disregard of the law," he said.
The minister said quasi-fiscal activities by themselves were illegal, even if the Minister of Finance could have given such instructions as only such activities should have been done with Treasury authority granted by Parliament.
"Nobody is compelled to comply with an unlawful instruction. An unlawful instruction is entitled to be ignored," he said.
The minister drew the ire of Zanu-PF legislators when he said even sanctions were not an excuse to use by the central bank to engage in quasi-fiscal activities.
He said one of the clauses he had reservation with was the powers conferred by the Bill to the Minister of Finance which he said were conferred to him by his colleagues in Cabinet.
The minster said Government would take over all companies created and owned by the central bank and these would be allocated to line ministries once the legislation was passed.
The line ministries could dispose the companies should they feel that the firms were heavily indebted.
"The bottom line is that the bank should stick to its core functions," Minister Biti said.
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