Parliament has accused the Reserve Bank of Zimbabwe (RBZ) of illegally mortgaging the country's future gold sales as security for the central bank's external loans while slamming the apex bank for failing to keep adequate foreign currency reserves to meet external obligations.
This comes at a time officials at the Ministry of Finance and Economic Development have told the Zimbabwe Independent that the RBZ has not divulged to the parent ministry how much of the country's minerals it securitised. It effectively means the government has no idea which minerals have been mortgaged and how much is at stake.
Zimbabwe is channeling US$5 million a month from gold earnings to service debts.The Parliamentary Portfolio Committee on Public Accounts, in its report focussing on RBZ compliance issues, said the bank was supposed to seek parliamentary approval as "all receipts from gold sales constitute revenue for the country, which should be legally appropriated by parliament".
"Evidence submitted was that government was paying US$5 million per month as loan repayments. These payments were being made against the country's monthly gold earnings of between US$15 million and US$16 million," the committee said.
"The committee's finding was that the central bank had no legal basis to assign export receivables to repayment of loans without parliament's approval.
Contrary to the (RBZ) governor (John Mangudya) and officials from the bank that Sections 7(1)(n) and 49 of the Reserve Bank of Zimbabwe Act give them the legal basis to do so, the committee's view is that all receipts from gold sales constitute revenue for the country, which should be legally appropriated by parliament. It was also apparent that there was no limit set in terms of export receivables that could be used as security for the loans."
The committee also slammed the RBZ for costly quasi-fiscal activities which were contributing to domestic debt. The RBZ quasi-fiscal expenditure, which has contributed to domestic debt stand at US$8,1 billion.
As part of the recommendations, the committee advised the Finance and Economic Development minister (Mthuli Ncube) to regularise the securitisation of export receivables as security for loans contracted by the central bank by presenting the arrangement for approval to parliament.
"In the absence of a legal instrument authorising securitisation, the Minister of Finance and Economic Development must, by 31st December 2019, bring to report and strategy detailing Zimbabwe's exit strategy and defection from all agreements where Zimbabwe's minerals had been securitised."
The committee also reported on the central bank's failure to maintain adequate foreign currency reserves, with the country having only three to four weeks' cover.
According to the Reserve Bank Act Section 49(2)(a), "the bank shall maintain sufficient reserves to cover one hundred per centum (100%) of its liabilities to the public, held in foreign currency accounts in any banking institution".
The parliamentary committee found that since 2009, when the country adopted the multi-currency system, the RBZ has never maintained foreign currency reserves to match statutory requirements.
"At the time of receiving the oral evidence, the committee established that the country had about US$500 million which constituted three to four weeks cover in reserves," the committee said.
"This position is unacceptable as this leaves the country at great risk of being unable to meet its external obligations."
In its recommendations, the committee gave the RBZ up to December 31 2019 to build foreign currency reserves to a point where they reach the level stipulated by law. -- Staff Writer.