Govt has a role to play in the rehabilitation of RBZ

economy.
The central bank has largely remained undercapitalised since dollarisation and attendant constraints have weakened its position to intervene in the markets where necessary while putting paid to initiatives to effectively regulate the financial sector.
It has fallen short in its discharge of duty to complement the fiscal policy, a scenario that is untenable for an economy seeking to recover lost ground in the face of exogenous effects such as the global financial crisis.
The central bank has failed to play its crucial lender-of-last resort function, leaving the banking sector stranded. Depositors have had to contend with high lending charges because the central bank has not been able to guide banks in this regard.
Ordinarily, its overnight accommodation rates should determine the rates which banks can on-lend to depositors. It is thus gratifying to note efforts by Government to get to the bottom of the debt issue and come up with strategies that will deal decisively with the apex bank’s balance sheet position for the good of the economy.
The establishment of a Special Purpose Vehicle to audit the central bank’s activities prior to the multicurrency system should push to the fore the actual state of affairs and bring the issue to rest.
The debt has been thrown back and forth between the central bank and the Ministry of Finance with either party refusing to take responsibility but we applaud the common sense that now prevails, with a more decent and mature manner now being applied to deal with the situation.
At least US$400 million was inherited by the central bank governor Dr Gideon Gono from his predecessor in 2003 while the balance was incurred over the years as the bank led efforts to fend off economic challenges largely brought about by sanctions imposed by the West.
Dr Gono has previously given a synopsis of the debt situation but the finer details regarding the authenticity of how and when the debt was accrued are issues the SPV should be able to handle.
An administrator, to be provided for under an Act of Parliament that will operationalise the SPV, is expected to take claims from creditors while the RBZ will provide him with a list of its debtors.
Private firms and individuals who had their foreign currency accounts invaded, gold producers that are yet to be paid for deliveries and others that claim to be owed millions of US dollars by the central bank should begin to see the light in terms of having their dues finally settled.
Of course it is only fair that the central bank makes good all these amounts. Gold producers are said to be claiming about US$30 million while banks are said to be owed US$83 million. Financial instruments have, however, already been put in place to deal with the latter.
The central bank is presently laden with quasi-fiscal assets, some of which were put on sale last year. The administrator will have to assess and decide on their fate. Most of these assets and companies came into operation during the pre-2009 hyperinflation challenges when the central bank engaged in activities outside its normal purview to rescue the economy.
The RBZ debt has attracted intense criticism for Dr Gono and he has on many occasions sought to explain his position but it is now incumbent upon the SPV to put the issue to rest once and for all.
Most of the debts are said to have been incurred on behalf of Government hence it would be prudent for Government to take over its portion while the central bank clears off its part to give it more financial wherewithal to operate effectively.
We hope the SPV will be put in place without delay so that it gets down to business sooner rather than later. The central bank cannot survive much longer with such a huge debt burden while it urgently needs recapitalisation to operate optimally.
Injections of fresh capital to the tune of US$20 million as stated by Minister Biti can only go so far hence the need to ensure more funds are poured into the institution so it carries its mandate effectively.
Liquidity challenges that have continued to constrain the economy could be managed more effectively and solutions sought more decisively if the presently handicapped central bank gets back in shape.