Zimbabwe finance minister Tendai Biti has successfully pushed through central bank reforms that are meant to clip the wings of bank governor Gideon Gono.
Gono, whose appointment has remained an outstanding issue of the Global Political Agreement (GPA) between President Robert Mugabe and Prime Minister Morgan Tsvangirai, has vowed not to leave the Reserve bank.
Mugabe has also come out in full support of the embattled governor but the Movement for Democratic Change insists that he must be fired.
Said Biti: “It is important that we restore the legitimacy, credibility and integrity of the reserve bank, so I’m pleased to advise that Cabinet has agreed on the fundamental amendments to the Reserve Bank Act.”
Some of the reforms of the RBZ Act include amendment of section 6, 7 & 8 of the central bank to ensure that it sticks to its core business, that of crafting the monetary policy, stabilization of the Zimbabwe dollar and supervision of the banking sector.
“There will also be reforms around, the composition of the board which will play an oversight role to the bank. The board will ensure that there is fiduciary responsibility and compliance with the Act. We are taking what are currently the core functions of the bank to a specialized monetary policy committee,” said Biti.
There will also be reforms relating to curtailment of the central bank to borrow. The Reserve bank has borrowed more than US$1 billion during Gono’s controversial tenure.
“There will be provisions that will force the liquidation and rationalization of all non-core assets and companies such as Homelink, Fiscorp so that the bank remains trim, lean clean and legitimate,” said Biti.
“We will remain focused in reforming our institutions. There is nothing that will distract us from executing that mandate of making sure that we reform our institutions,” said Biti, in a thinly veiled reference to Gono’s media onslaught.
Biti said that Zimbabwe was still surviving on “cigarettes and alcohol” taxes as the economy was under-performing although inflation was going down.
Speaking at the launch of his ministry’s website, Biti said Zimbabwe had since the formation of an inclusive government by President Robert Mugabe and Prime Minister Morgan Tsvangirai in February, collected about US$174 million which showed a shortfall on the US$200 million the government had earmarked to collect.
“Seventy percent of the amount that we have collected is going towards civil service allowances, so we have major challenges in that we do not have fiscal space.
The structure of the receipts is also very skewed and are reflective of an economy that is not healthy at all. Direct taxes and corporate taxes are still less than 12 percent of our income when in a normal tax structure should be 55-60 percent of our income. So we are still continuing to rely on customs duty and excise duty which is not good enough. No country in the world has survived on cigarettes and alcohol,” said Biti.
He said many of the wild and unbelievable economic figures were beginning to stabilize. Inflation since January has averaged negative three percent and the government was targeting that by December inflation will be at “very most not more than four-five percent.”
A budget review has been set for mid-July, according to Biti.