Govt to clear RBZ gold bonds

Published: 17 April 2014

THE Government will clear gold bonds owed by the Reserve Bank of Zimbabwe to bullion producers as part of efforts to clean the central bank's balance sheet, Finance and Economic Development Permanent Secretary Mr Willard Manungo has said.

"Gold bonds are part of the claims on the RBZ. The idea is to clean the RBZ balance sheet by removing all the claims on it. Ordinarily these would include all the claims also relating to gold bonds," he said.

Although Mr Manungo did not disclose how the bullion producers would be paid, Government is likely to issue Treasury Bills to offset the debt. Mr Manungo was addressing Parliament's Portfolio Committee on Public Accounts recently.

RBZ subsidiary, Fidelity Printers owes gold producers more than $50 million, a debt which has been taken over by Treasury. This is part of the $1,35 billion central bank debt that Government has assumed.

The Government has so far issued instruments towards clearing some of the RBZ debt as a first step towards capitalising the central bank.

The first step involves Treasury assuming the bank's debt. So far Treasury has issued TBs worth more than $130 million in two batches towards clearing FCA and tobacco retention balances owed by the RBZ.

Of the $130 million, $16 million went towards the tobacco retention balances while the difference was raised towards FCA balances. More paper worth about $14 million will be issued to clear the $30 million debt towards tobacco retention balances.

The TBs were subscribed for 100 percent with several banks participating in the issue. The Government says capitalising the RBZ would help the central bank play its banker of last resort role.

A senior lecturer in the University of Zimbabwe Economics Department Professor Ashok Chakravarti said in a paper titled "Liquidity Challenges in Zimbabwe: Turmoil and Tenacity" presented at a Sapes discussion on liquidity challenges last month said the central bank cannot obtain or provide guarantees for external lines of credit because of debt arrears and default.

He said the central bank functions should be resuscitated by measures to create confidence and improve banking sector governance and supervision.

"This will enable banks to lend more and resort to the central bank when in a deficit position. In line with this, the restoration of the interbank market like the one underwritten by the Africa Export and Import Bank is urgently needed," Professor Chakravarti said.
- The Herald