Zimbabwe: There's a U.S.$1,13 Billion Skeleton in the RBZ Vault

opinion

Earlier this year, I conducted an investigation into the catastrophic failings of Zimbabwe's governance architecture. For the most part, the probe focussed on the contribution of failed governance to the national debt problem, whose impact has had serious ramifications for economic development, social order and political stability.

The full-length report will be released soon but -- at the risk of pre-empting it -- for purposes of this column I will highlight just one aspect: the assumption of bad loans totalling US$1,13 billion by the Zimbabwe Asset Management Company (Zamco), a Reserve Bank of Zimbabwe (RBZ) vehicle.

The government said it was bailing out commercial banks by taking over their non-performing loans through Zamco, but sceptics rightly argued that this was just a scam to allow political elites and their cronies to avoid repaying loans.

This has contributed to a spike in government debt. Zamco went on to absorb US$1,13 billion of banks' non-performing loans, the equivalent of 5% of gross domestic product at the material time, under the pretext of rescuing the financial sector.

Speaking at a debt conference in Harare this year, Martha Mugweni, an official in the Public Debt Management section of the Ministry of Finance, sought to explain Zamco's workings: "Zamco went to the financial sector, took over private debt and they're restructuring the private debt to make it payable and to make in sustainable. They're paying that from the restructured formula they came up with together with the client. So this one (Zamco), we are discounting it from our public and publicly guaranteed debt.

We are still discussing, so when we remove that, our total debt as at end of December 31, 2018 will be US$16,6 billion, not the one we reported in August 2018." But there is still no indication that Zamco's US$1,13 billion is no longer part of public debt.

Tinashe Kaduwo, an economist with experience in the banking sector, told me it is wrong for the government to continue burdening taxpayers with the failings of the financial services sector.

"There is a legal, moral, ethical and philosophical issue arising from all this. Why should ordinary citizens pay the costs -- in terms of higher taxes -- for the failings of the financial sector?" asked Kaduwo.

For eight months now, the RBZ has refused to reveal the beneficiaries of this billion-dollar largesse, despite Parliament's request for this information in the public interest. As a result, the Public Accounts Committee is now mulling a lawsuit to compel the RBZ to reveal the beneficiaries. The celebrated Danish physicist Niels Bohr once said: "The best weapon of a dictatorship is secrecy, but the best weapon of a democracy should be the weapon of openness." What skeletons is the central bank hiding in the nation's vault?

Zimbabwe's constitution spells out the founding values of the republic. Among these are principles of good governance which bind the state and all institutions and agencies of government and they include: "Transparency, justice, accountability and responsiveness." The central bank must reveal -- without fear or favour -- the beneficiaries of Zamco's US$1,13 billion largesse.

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