The Reserve Bank of Zimbabwe (RBZ) raided depositors' accounts, wiping out US$3,2 billion in the process, before introducing bond notes in 2016 and eventually outlawing the use of foreign currency in a grand heist which left individuals and companies high and dry, a parliamentary inquiry has found.
The introduction of the bond notes also led to the destruction of the multi-currency system after the central bank turned depositors' United States dollar balances into savings bonds, causing an acute shortage of the greenback.
Initially, the bond note was introduced under the guise of being an export incentive, trading at 1:1 with the US dollar, with RBZ governor John Mangudya and the then finance minister Patrick Chinamasa assuring the banking public that they would be able to withdraw their deposits on demand.
However, that was not the case as the bond notes, which were quickly losing value against the US dollar, were foisted on the public as the greenback disappeared from circulation.
Government introduced the Real-Time Gross Settlement (RTGS) dollar to trade alongside other currencies in February this year before completely outlawing the multi-currency system in June and introducing local currency, now formally known as the Zimbabwean dollar.
In an explosive report tabled in parliament, the Public Accounts Committee (PAC) said the money was used to fund quasi-fiscal activities and government spending, resulting in the central bank creating "fictitious money".
The RBZ was adamant that of the US$3,2 billion that it converted to savings bonds, none of it came from people's bank accounts, according to the committee's report on compliance issues for the RBZ.
However, the committee said it had evidence of how the RBZ mopped up US dollar balances, particularly those of big corporates such as Delta, Zimplats, Econet and Simbisa in a move that insiders described as fraudulent.
"On the contrary, it appears that the RBZ aided and abated an expansionary fiscal policy which resulted in the huge budget deficits experienced in 2014," the committee, chaired by Harare East legislator Tendai Biti, said.
"The committee also makes the findings contrary to the protestation by the RBZ that, in fact, it mopped up deposits in bank accounts for onward lending to central government.
"Our finding is based on the clear and uncontroverted evidence that the relevant companies and organisations whose deposits were later on converted into savings bonds, in fact kept the same in banks and not in their safes, pillows or offices. The RBZ's actions inevitably led to a massive depletion of any US dollar balances in the system," the committee said.
The central bank is undercapitalised and does not have resources of its own, according to the report. "As shown above, all the money it lent to government was mopped from people's bank balances. It is a fallacy to pretend that the central bank in its current position can lend to government.
This is just a license of pushing the central bank into embarking on creative means of resource mobilisation which includes interfering with bank deposit and export earnings."
According to the report, the RBZ borrowed the US$3,2 billion to finance government operations without parliament's authorisation.
"The committee notes that an expansionary fiscal policy forced the RBZ to actively enter that market to mobilise resources for and on behalf of central government. The challenge with this process is that it was done outside parliament and the amounts were well above those approved by parliament.
The committee put it to the governor that he had the duty to ensure that the government complied with its own budget and the limits provided by parliament," the report reads.
The report was compiled after an inquiry into the activities of the RBZ through oral evidence and the Auditor-General's report related to the Appropriation Account of the Ministry of Finance and Economic Development.
The Biti-led committee gave a deadline of December 31 2019, to ensure the RBZ Act is amended so that the central bank sticks to its original core mandate.
The committee said the RBZ should not, "acting on its own or otherwise, carry out fiscal activities, quasi, or otherwise".
"For the avoidance of doubt, the committee recommends that the mandate of the bank should solely be: (i) acting as a banker to the state; (ii) managing the monetary policy; (iii) managing the local currency; (iv) managing the exchange rate; (v) managing the national payment system; and (vi) acting as lender-of-last-resort," the committee said. "Through the Minister of Finance, the RBZ must report twice a year on all monies it would have borrowed within that particular year and monies lent. The RBZ must comply strictly with Section 49 of the RBZ Act that its lending must be backed by 100% reserves."
The committee also gathered that government had unprocedurally borrowed US$2,99 billion from the RBZ as at December 31 2018.
Mangudya had not responded to questions sent to him by the time of going to print. He was also not answering his mobile phone.