Gono last week told a parliamentary committee on budget, finance and economic development that banks had not inflated the Zimbabwe dollar balances to bust the US$7 million set aside by treasury to convert the useless local currency locked in the banking system.
His remarks are contrary to Biti’s post national budget sentiments when he accused banks of “impregnating” bank balances soon after he announced treasury plans to demonitise the Zimbabwe dollar which became useless after the adoption of multiple currencies last year.
Biti made the humbling announcement which marked the death of the local currency when he presented his the Mid Term Fiscal Policy Review in July. No progress has been made since the policy shift was made public.
“The bank balances suddenly became pregnant after the announcement. Suddenly, they doubled. Suddenly, they became pregnant. That’s why we stopped. Bankers, tell us who fathered and who mothered?” Biti told business leaders at a recently held Confederation of Zimbabwe Industries (CZI) post-national budget breakfast meeting.
Gono, however, stood up for banks saying the alleged arbitrage and rent-seeking behaviour by banks had no financial benefits to the banking system, still emerging from a decade-long economic crisis.
“It does not pay any financial institution or any bank to inflate a customers’ account because the benefit does not accrue to the bank,” Gono said.
“So from a technical point of view, I have some difficulties in comprehending how that would have happened. But in my next meeting with the Honourable minister, I will be able to receive more enlightenment in that area. But I want to assure you from a technical point of view that such eventuality does not exist.”
“What could be of reference to the minister”, Biti argued, is that the banking public particularly in remote areas could have had money outside the banking system and “upon knowing or realising that there is going to be compensation they took up that money and took it to bank it.”
“What would be in question is the assumption that was taken in computing and arriving at the amount of US$7 million, which then means that there was some omission of genuine depositors or liabilities that were being held elsewhere, which they should have accounted for in the computation of what’s due,” Biti added.
Cash strapped local industries want government to immediately convert local currency bank accounts to US dollars as a desperate bid to improve liquidity on the market.
The CZI says government should use a United Nations exchange rate of 35 quadrillion Zimbabwe dollars to the United States dollar.
The compromise currency exchange rate resulted from failure by the central bank to review rates at the height of an unprecedented hyperinflation and economic decline which stabilised after the adoption of multi currencies last year.