GOVERNMENT has contravened the Reserve Bank of Zimbabwe Act by over shooting its overdraft limit from the central bank as stipulated by law. This week businessdigest established that
government had side-stepped stipulated regulatory requirements on its overdraft from the central bank, as it had been availed $80 billion.
This is more than the stipulated $228 billion in a space of a week. This effectively means that government accessed $308 billion.
The move is in direct contravention of the Reserve Bank Act which states that government cannot exceed more than 20% of the previous year’s revenues.
Last year the estimated revenue and international grants amounted to $1,141 trillion.
The central bank’s State of Assets and Liabilities documents for January indicate that there were loans and advances amounting to $789 trillion made as of January 16.
This was up from $480,trillion as of January 9.
Director of finance and administration Peter Mujaya compiled the reports.
Although the advances are normally used either for liquidity support and loans to banks during that period there were no advances made to such areas.
Investigations have since revealed that the increases were due to huge increases of overdraft borrowing by government.
According to the Reserve Bank Act, the central bank shall not lend or advance “moneys to or directly buy, discount or rediscount bills, notes or other obligations from the State or any Fund established by the State so that the amount outstanding at any time exceeds the equivalent of twenty per centum of the previous year’s ordinary revenue of the State”.
The regulation however excludes government stocks and Treasury Bills purchased on the market for monetary policy purposes.
This regulation effectively means that since last year’s Revenue and International Aid Grants amounted to $1,141 trillion, government had to limit itself to only $228 billion, but instead ended up gobbling $80 billion more in a space of a week.
The over-expenditure by government flies in the face of RBZ governor Gideon Gono’s claim during his monetary policy announcement that while the private sector accounted for a greater part of credit creation in the economy, government access to the Reserve Bank overdraft was within approved statutory limits.
The continued appetite for easy cash by government is set to worsen inflationary pressures, which the central bank is battling to contain.
The failure to rein in on government’s quest for money has been problematic over the years as it has been failing to live within its stated policy framework.
Analysts said although the central bank had not justified such huge quench for funds, the money could have been used to pay for civil servants’ salaries, who recently got a 250% salary hike.
The Act however is silent on penalties to be exacted in case government surpasses the limits.