THE Reserve Bank of Zimbabwe has announced that it would not inject any capital into parastatals, which had become heavily reliant on the central bank for
cash-flow support, advising them to seek assistance from their parent ministries.
Announcing a memorandum to financial institutions dubbed “Fine Tuning of Monetary Policy” this week, Reserve Bank governor Gideon Gono said the central bank was no longer willing to put money into non-performing parastatals.
Gono said some parastatals and local authorities were “developing seemingly perpetual reliance on the Reserve Bank for support, unacceptably surrendering their cash-flow planning and survival needs to the bank”.
“It has become necessary to institute stringent measures that restrict and forbid non-performing parastatal and local authorities from accessing central bank support,” said Gono.
Gono mentioned Air Zimbabwe, Zimbabwe National Water Authority, Zesa Holdings, Grain Marketing Board, Agriculture and Rural Development Authority and Zimbabwe Iron and Steel Company as the major non-performing parastatals that had bothered the central bank with requests for funding.
“Parastatals and local authorities are hereby advised that their first port of call for financial assistance shall be their parent ministry,” Gono said.
“Parent ministries and management responsible for these institutions are hereby advised to seriously take note of this position,” Gono said.
The Reserve Bank has pumped out large sums of money to parastatals and local government authorities under a quasi-fiscal operation critics blame for fuelling inflation and bloating government deficit.
Gono has previously referred to parastatals and local authorities as “the missing link” in the country’s efforts to turnaround a struggling economy.
Some analysts have pointed out that radical transformation of loss-making parastatals would help in the country’s fight against inflation, currently sitting at 1 023,3% year-on-year for September.
Zimbabwe’s parastatals have been a major drain on the fiscus.
Most parastatal heads remain unaccountable for poor performance, and the state-owned firms have been grossly inefficient and lack transparency in their operations.
Gono said the National Railways of Zimbabwe and the Zimbabwe United Passenger Company were the only parastatals showing signs of improvements due to support given by the central bank.