Blocking of the Bill was not the way to go.
The Bill courted controversy in both Zanu PF and the MDC formations as it was widely seen to be targeted at clipping the wings of central bank governor Gideon Gono who has been fighting a war of attrition with Biti since the formation of the inclusive government.
An economist and investment analyst Lance Mambondiani noted this week that Gono had become a symbol of the inadequacies of the central bank as an institution and its enabling Act.
However, Mambondiani added the debate should not have been about personalities, but changing structures and systems — rationalising and reforming the central bank into an optimally configured institution operating with minimum manipulation from politicians, increasing transparency and accountability and enacting clear limitations to functions and avoiding gross misuse of resources for political purposes.
There was no doubt however that the governor’s interpretation of his role in financial intermediation was based on a very generous and elastic interpretation of the Reserve Bank of Zimbabwe Act which was perhaps not specific enough. There can be little doubt that the central bank, whether justifiably or not, was primarily responsible for the country’s stratospheric inflation due to quasi-fiscal operations carried out without provisioning in the state budget.
Because of this, Biti came up with the Bill passed on Wednesday to keep in check the central bank, which has been at the forefront of destroying the country’s economy through unbridled running of the mint to finance quasi-fiscal operations that drove inflation to unprecedented levels. The economy almost imploded on Gono’s watch!
The motive of the Bill was more or less of the “James Makamba law” hurriedly gazetted to keep the beleaguered businessman in custody for 21 days before appearing in court on charges of foreign currency externalisation.
Biti’s Bill, its critics say, was aimed at “fixing” Gono, not to improve good governance and financial prudence of the central bank.
Laws throughout the world where good governance reigns are promulgated for posterity’s sake, not to deal with current problems or to settle scores.
Biti was accused of trying to usurp the powers of a central bank governor and this did not curry favour with Zanu PF and even some of his colleagues in the MDC-T.
Section 18 of the Bill, wholly struck off on Wednesday, sought to confer on the minister powers to reverse decisions of the central bank not in line with his thinking.
New clauses agreed between Biti and Zanu PF no longer make it a requirement that the permanent secretary of the Ministry of Finance should be a board member of the central bank as this was tantamount to removing the autonomy of the bank.
But the most shocking amendments suggested by Zanu PF and accepted by the House of Assembly were the granting of immunity to the central bank governor and deputies, the bank, the minister, the board and any other employee for any claims that may arise for anything done in good faith without negligence.
What have they got to hide?
Given that this country is coming from a period where the central bank abused its power and that a lot of questions are yet to be answered on the bank’s role in fuelling the parallel market, financing of Zanu PF and quasi-fiscal operations, one is tempted to ask why grant immunity before a forensic audit of the bank is done.
There was need to first improve the bank’s transparency and accountability to the taxpayer through a strong bipartisan finance committee in parliament with real power to grill or recommend the removal of a governor in the event of abuse of power.
Given what Biti told parliament last week, there was need for a forensic audit of the central bank before anyone was granted immunity. The minister gave a vivid account of how the bank had usurped the powers of government and even engaged in activities that border on criminality.
Biti said: “Within the context of Zimbabwe, the RBZ has for the past four years become the major economic player through QFAs (quasi-fiscal activities). The bank easily overtook treasury as the major fiscal player. Some of the activities financed by the bank included election- related expenses, transfers to parastatals, subsidised direct landing below cost of equipment and fertilisers to farmers, and allocation of foreign currency at subsidised exchange rates.
“These expenses were financed by surrender requirements on export proceeds, the retention of earnings of gold and agricultural sectors in excess of mandatory surrender requirements, the confiscation of most foreign currency deposits, external borrowing, purchase of foreign currency at the parallel market exchange rates and monetisation. For all intents and purposes, the bank became the government while the government became an onlooker while these developments took place.”
Biti reminded legislators that the quasi-fiscal operations contributed to the loss of confidence in the economy. The unprecedented hyperinflation had led to the demise of the local currency and the de facto dollarisation of the economy.
The issuing of a blanket amnesty in the circumstances sets an appalling precedent. Parliament has let the country down and, as we have warned, the MDC formations are happy to be compromised.