Gono Unlikely To Meet Target This Time Around

RE-APPOINTED Reserve Bank governor Gideon Gono might not meet the next January’s deadline that brings an end to the bank’s involvement in quasi-fiscal activities despite promising an end to the supra-ministerial interventions, analysts have said.


Analysts said delays in forming an inclusive government and the absence of a national could force Gono to perpetuate quasi fiscal activities aimed at bailing out the heavily indebted government. This week President Robert Mugabe gave the incumbent Reserve bank governor the nod to see through another term in office amid weeks of speculation over his fate.
But analysts said although Gono’s re-appointment would inspire little international and local confidence, his new lease of life at the helm of the bank would not introduce new monetary measures that would guide the country from the decade long economic recession.
With annual inflation now over the official 231 million percent, critics blame the Gono for stoking inflation through quasi-fiscal interventions in his just-ended first five-year term.
Accepting re-appointment of the second term Gono said he would cut his seemingly erstwhile involvement on quasi-fiscal matters.
 “With effect from January, 2009, therefore, the Reserve Bank will be focusing on the core businesses of inflation control and financial sector stability,” Gono said.
“Under the new thrust, it would be expected that all our parastatals, local authorities and all government departments and ministries will fully discharge their statutory mandates without the need to rely on the central bank for assistance.”
Expressing skeptism in Gono’s remarks, University of Zimbabwe political science professor Eldred Masunungure said the Reserve bank could continue with its “ill-advised policies”.
“He should not have undertaken the policies in the first place,” Masunungure said. “In my view those were outside his jurisdiction. The fact that he is abandoning them is however salutary bearing in mind that he should have started carrying out the policies.”
“It will be extremely difficult to stop those activities given the ongoing delays in forming an inclusive government and the absence of a national budget. I do not see the talks being concluded in January. I think that will be very optimistic and in the absence of a budget the Reserve Bank may be compelled by default to intervene,” he said.
Masunungure said the establishment of a new institution tasked with rounding up the current quasi-fiscal activities would usher in new but concealed quasi-fiscal activities by the Reserve Bank.
“The Reserve Bank has merely the created creature—an invisible conduit for new quasi-fiscal operations. My fear is that the quasi-fiscal activities will continue but hidden under the institution. The Reserve bank has become habituated in carrying out quasi fiscal activities,” Masunungure said.
Sources also said the re-appointment of Gono could also introduce a contentious issue to the ongoing negotiations over the formation of an inclusive government between President Robert Mugabe and MDC leaders-Morgan Tsvangirai and Arthur Mutambara.
Former university of Zimbabwe economics professor Rob Davies however described Gono’s statement as mere rhetoric. Gono made the same remarks when he presented last year’s first quarterly monetary policy that also resulted in the establishment of Fiscorp — a wholly owned Reserve bank subsidiary tasked with carrying out quasi fiscal activities.
Since its formation the Reserve bank has undertaken programmes such as the Farm Mechanisation, Basic Commodities Supply Side Interventions, the Agricultural Support Enhancement Facility and the Parastatals and Local Authorities Re-orientation Programme.
“This is not the first time that the governor has said he would cease quasi-fiscal activities,” Davies said. “ He made similar remarks when Fiscorp was established but nothing much has been said about it since then. Its mere rhetoric.”
ZB bank group economist Best Doroh said Gono’s decision to stop quasi-fiscal activities was commendable if fully implemented.
“This indicates good indications on the part of the bank and we hope that this promise will be fully implemented. In my view these activities had been contributing to inflation through credit creation,” said Doroh.

 

By Bernard Mpofu