Monetary Policy: Gono assumes real central banker’s role

credit has seen an explosion in individual borrowing; while much of this is done by retailers no less than 15 percent of the loan books of banks now comprise consumer debt.
This desperate desire to borrow and spend, rather than save for a rainy day, has two most unfortunate knock-on effects.
First Zimbabwe as a nation is importing far more than it exports, almost US$2 billion last year. External capital investment into Zimbabwe cuts into that atrocious total, but not nearly enough. Too many people fail to realise that just because we now use hard currencies in our personal and business dealings, and so no one has to find “forex” to import something, we as a country still have to balance our books.
If we do not we face, in the end, another economic crash as our external debts grow or as our capital is simply sent out of the country.
The second serious problem that arises from this anti-saving and overspending attitude is that our factories, our mines and our farmers are starved of the money they need to rapidly expand production, hire more people and grow our economy faster.
The Asian miracle nations, that at the moment are driving the world economy, are built on the accumulated savings of billions of ordinary Chinese, Indians, Malaysians, Vietnamese and all the others. Some countries, such as Singapore, even have compulsory savings.
Rising commodity prices are saving Zimbabwe from imminent disaster but, and as a banker he has to see the dark cloud over the silver lining, Dr Gono correctly points out that a modest global recession could wipe out those gains.
Banks, of course, have to do their share in mobilising savings. And while he did not dwell on this, Dr Gono did hit the banking sector hard for attitude.
Far too many seem to think it will be “all right on the night”, a policy that was followed by far too many in the US and Europe and which caused the present global financial mess.
Zimbabwe is not too badly off here, but Dr Gono sees no reason to take chances. He wants the banks that are undercapitalised to get fixed, now, or quit.
We agree. We cannot have a meltdown. Banks are there to serve the country and their customers, not a selfish and small group of shareholders who know the “right people”.
He wants all banks to stop circumventing the rules of prudent banking, even if this is quite legal. His investigators have found sweetheart deals, unreported suspicious transactions by customers avoiding rules, greed pushing banks to limits and the like.
He wants them stopped. In short, he wants banks to follow the rules in spirit as well as law and he wants to avoid the sort of banking mess that hit so many countries when bankers’ greed overtook bankers’ responsibilities.
Some banks, including our biggest and best banks, do follow rules properly.
Some of these banks are foreign and some are Zimbabwean. Those that do so are making profits for their shareholders so there is no need to bend the rules to make money. Indeed the market appears to like prudent banks, and depositors seem to want no other candidates for their savings.
It was also gratifying to see that the animosity that some thought appeared to exist between the Reserve Bank and the Finance Ministry has been transformed into close collaboration, with each doing their own job properly and helping the other do theirs.
Dr Gono did not exhibit his habitual bluntness in this area, but made it clear by implication that when it comes to bank supervision the ministry is ready to push for the needed legal changes, and that he in turn is ready to help the ministry with creative banking ideas, such as securitisation of assets, fund economic growth in Zimbabwe.
This is how it should be.
He did make just a passing reference to the fact that Zimbabwe uses other people’s currencies. But overwhelming popular opinion is that we do so for a long time yet; in any case currencies were not the problem in those countries hit by recession. Bad banking, people spending more than they earned, countries doing the same, and poor regulation were the main causes.
And on those issues Dr Gono is back in his proper saddle and making it clear that he, backed by old and new laws, is simply not going to let it happen here.