Cabinet moves to plug financial leakages

Cabinet moves to plug financial leakages
Published: 21 July 2017
BEING conduits for most financial transactions, governments closely watch banks and bank executives who are normally used as mules in illicit financial flows.

By their nature, illicit financial flows take complex structures and also use non convention practices such as physical smuggling of cash out of the borders, making it difficult for authorities to monitor and plug leakages.non convention practices such as physical smuggling of cash out of the borders, making it difficult for authorities to monitor and plug leakages.non convention practices such as physical smuggling of cash out of the borders, making it difficult for authorities to monitor and plug leakages.

The complexities of the world of illicit financial flows will however not deter the Zimbabwean Government as it emerged Cabinet last month directed government officials to take corruption, illicit financial flows and underground foreign exchange dealings head on as part of stern efforts to deal with the current liquidity and cash crisis.

This comes after reports by our sister publication Business Weekly that Zimbabwe's foreign currency shortages are worsening over massive capital flight amid indications corporates and business tycoons have externalised $3 billion between 2015 and June 2017 mainly to Botswana, Mauritius and the Far East, a development currently under intense investigation.

The 18th Meeting of Cabinet held on June 13 directed that the malpractices be explicitly dealt with, Finance and Economic Development Minister Patrick Chinamasa said in his Annual Budget Review for 2016 and Outlook for 2017 statements that were presented to Parliament yesterday.

Minister Chinamasa said the Cabinet meeting, in the same vein, said the commercial Court, meant to exclusively deal with commercial disputes,  must be operationalised.

"In taking the above decisions, Cabinet has underscored that it will not tolerate indiscipline, and the associated leakages besetting the economy," Minister Chinamasa said.

"The current liquidity and cash challenges are not unique to this economy but an expected temporary and transitional phenomena for a dollarised economy. These challenges, which also stem from the proliferation of indiscipline related to activities of money changers, as well as foreign currency externalisation cases, are being dealt with," added Minister Chinamasa.

Of the $3 billion, about $1,8 billion was shipped out illegally while the balance was expatriated through service fees, management fees, technical fees and royalties, according to sources close to official investigations. Reserve Bank of Zimbabwe (RBZ) deputy governor Dr Khupukile Mlambo is on record saying the country lost on average $150 million monthly in 2015 to illicit financial flows.

Corruption has also taken a toll on the country's economy with individuals in the corridors of power and their cronies getting multimillion dollar contracts without going to tender. In a number of instances tenders are perennially inflated while advance payments are made on work that falls below standard. In extreme cases, the contractors do not deliver. Foreign exchange dealings are also creeping up amid growing demand for foreign currency as the liquidity and cash crisis deepens.

Three Zimbabwe National Road Administration (Zinara) bosses were on Wednesday arraigned before the courts for illegally sourcing foreign currency on the pretext of servicing a $206 million loan for the rehabilitation of the Plumtree-Mutare Road.

Corporates and individuals are also trading cash on the black market at premiums given that the economy largely relies on imports. Giving an update on the banking sector, Minister Chinamasa said the financial sector remains stable, notwithstanding the prevailing liquidity challenges with ongoing efforts to promote financial inclusion, plastic money, e-banking services and broader use of multi-currencies yielding positive results.

Growth in the financial sector, inclusive of the banking, insurance and pension, securities and micro-finance sectors, averaged 2 percent in 2016.

This, Minister Chinamasa said, was against the background of tighter liquidity conditions, which Government continues to address by implementation of Zim-Asset initiatives to stimulate increased domestic production and value addition, alongside the ongoing innovations in the provision of digital financial services on a business-to-business, business-to-persons and persons-to-persons basis.
- the herald
Tags: Cabinet,


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