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RBZ continues quasi-fiscal projects

ZIMBABWE’S troubled financial system is exposed following revelations by the IMF that the Reserve Bank has continued to channel statutory reserves to finance quasi-fiscal projects, which has rendered it incapable of backing up banks.


According to a report made by a visiting IMF team this month, the central bank has continued to utilise “unencumbered international reserves” further eroding dwindling state coffers.


The negative position, the report stated, means that the RBZ was US$38,6 million short of assets required to bail out banks in the event of a liquidity crunch.

“The RBZ has used foreign reserve assets to fund its operating expenses, withdrawals of foreign currency amounts and debt service, as well as payments on behalf of the government,” the report states. “The total value of fund outflows is reported to have been $45,5 million between end-December 2008 and end-August. The RBZ also accumulated $40,3 million in arrears on operating expenses during the first nine months of 2009.”

Out of the fund outflows made between January and August this year, US$16,3 was pumped out to finance supraministerial activities that included financing troubled airline, Air Zimbabwe, paying presidential scholarships and financing diplomatic missions.

The report further revealed that the central bank accrued operating arrears in salaries, debts to the Zimbabwe Revenue Authority, pensions, communications and courier services.

The report also paints a bleak picture of the economy in 2010.

“The macroeconomic outlook for 2010 is subject to significant uncertainty, and the balance of risks to the outlook is slanted to the downside,” the report said. “On the downside a possible deterioration in the political situation, a potential emergency of liquidity or solvency problems in the banking system, or insufficient progress in maintaining the rule of law and enforcing property rights could undermine growth.”

The report added: “In addition, a possible sudden stop to capital inflows, higher than expected domestic credit growth or an adverse terms-of-trade shock could trigger a disorderly balance-of-payments adjustment with a concomitant negative impact on the financial system stability, revenue and growth.”

The Bretton Woods institutions however projected that Zimbabwe’s economy could record a “higher-than-projected export commodity prices and capital aid inflows” which could trigger a 3% economic growth.


Bernard Mpofu

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