Zimbabwe: RBZ Conceals U.S.$1 Billion Fat Cat Loans

The Reserve Bank of Zimbabwe (RBZ) has refused to hand over a list of beneficiaries of non-performing loans (NPLs) totalling US$1,13 billion which were inherited by the taxpayer via the Zimbabwe Asset Management Corporation (Zamco), forcing the Parliamentary Portfolio Committee on Public Accounts (PAC) to consider a lawsuit.

In its Report on Compliance Issues for the RBZ presented in parliament last week, the PAC said RBZ governor John Mangudya has been resisting to hand over the information on the controversial loans for the past eight months.

Government formed a special purpose vehicle, Zamco, in 2014, to mop-up bad loans in the wake of an alarming rise in the ratio of NPLs. The government, however, did not reveal the beneficiaries amid reports the facility was used to clear debts belonging to senior government and security officials as well as their close family members and associates.

PAC, said the RBZ, has been giving excuses to the committee which has been demanding full details and disaggregation by the bank of each loan portfolio taken over by Zamco, the names of individual defaulters, the amounts thereof, and the collateral security provided.

"Parliament should issue summons to the RBZ compelling the bank to comply with the lawful request for information on Zamco. An Act should be crafted to deal with the acquisition of Non-Performing Loans," the committee chaired by Harare East legislator Tendai Biti said in its recommendations.

The committee established that Zamco acquired 1 160 non-performing loans (NPLs) with a value of US$1,13 billion over the period 2014 to 2018.

The non-performing loans were bought through the issuance of treasury bills worth about US$1 billion. By March this year, about 260 loans were reported to have been repaid, leaving a balance of 882 loans.

This comes as the committee also noted that there is no legal instrument or Act governing the RBZ's non-performing loans unlike in countries such as Nigeria.

"The absence of a legal instrument makes the process opaque and subjective, leaving too much discretion in the hands of RBZ officials," the committee said in the report.

The committee said they would have to compile a different report on Zamco compliance once the information has been made available.

"This information, in oral evidence, the RBZ governor undertook to provide without delay. In fact, in the second meeting held on the 11th of March 2019 the governor explained Dr Cosmas Kanhai's (director of Zamco) absence as that he was compiling the information that we had requested.

"The Committee was shocked when it received a letter dated 18th March 2019, in which the bank claimed that it could not disclose the disaggregated information pertaining to the RBZ, the portfolio taken over, the amount lent and the security on the basis that: (i) protected by banker-client privilege existing between Zamco and the individual defaulter whose debt was being taken over. (ii) that the RBZ was covered and protected by section 60 of the RBZ Act as well as section 12 (2) of the Privileges, Immunities, Powers of Parliament Act," the report reads.

However, the committee disagrees with the bank's position, and responded on April 12 2019, saying parliament had a right to scrutinise any public institution as it was empowered by sections 117 and 119 of the constitution of Zimbabwe.

"We also reinstated our right of scrutiny of all revenues in terms of section 299 of the Constitution. We are pleased that Counsel to Parliament agreed with our position," the report reads.

The committee reiterated the position on May 21, adding that PAC had unlimited oversight powers.The committee said RBZ and other bodies that receive public funds cannot refuse scrutiny on the basis of technical legal arguments.

"On the 2nd September 2019 the RBZ Governor Dr J.P. Mangundya communicated with the chairperson of the Public Accounts Committee and undertook to supply all information requested by the committee. At the time of finalisation of the report, the information had not been submitted," the committee wrote.

The committee also raised concerns over Treasury Bills (TBs) that were issued to purchase NPLs from banks in the total sum of US$1,2 billion.

"The TBs are a levy on the Consolidated Revenue Fund and will have to be paid and honoured by the taxpayers of Zimbabwe. There was therefore a need to provide for these borrowings in an appropriation account to be approved by parliament in terms of section 305 of the Constitution. This did not happen in an Appropriation Act. Treasury bills became the major source of the budget deficit accrued between 2014 and 2018," the committee said in the report.

PAC said the RBZ had bypassed parliament noting that TBs had also become the major source of the country's domestic debt, which was US$9 billion but altered to ZW$9 billion.

"TBs should not be issued outside Parliament and without approval in an Appropriation Act. Bills of Condonation should be presented to Parliament together with the appropriate supplementary budget by December 31, 2019," the committee said.

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