Parliament’s Public Accounts Committee chairperson Tendai Biti says the Reserve Bank of Zimbabwe (RBZ) is effectively broke after government ran up its overdraft facility with the bank to finance its budget deficit.
Biti, who also served as Finance minister in the government of national unity between 2009 and 2013, said his committee will next month submit a report which will “shock” the
Speaking at a meeting to discuss the state of the economy organised by the British Council last week, Biti said government has been running up the overdraft facility to partly finance the budget deficit despite the RBZ being broke.
“As I am talking to you now, the government’s overdraft with the central bank is in excess of US$3 billion. In my capacity as chair of the Public Accounts Committee, we had the central bank governor (John Mangudya) giving evidence and testifying before our committee and in May of 2019 we are going to present before Parliament a report about the extent of that overdraft facility and that report is going to shock you,” he said.
“Here is the challenge: The central bank itself is broke, undercapitalised. So, the money that the government has actually been taking from the central bank does not belong to the central bank, it belongs to you and me. That is why you woke up one morning and went to your bank, whether it is Steward Bank (as an example), FBC, Standard Chartered Bank or First Capital Bank and your bank told you that there was no money…
“…because there had been a bank robber who had actually literally and metaphorically raided the central bank and that bank robber was central government. When the Government of National Unity collapsed in 2013, we physically left US$6,5 billion and that is why you were able to go to an ATM (automated teller machine) and get as many US dollars as possible.”
“The law, section 11 of the Reserve Bank (of Zimbabwe) Act, says the government overdraft with the central bank should not be more than 20% of the previous year’s revenue,” Biti added.
However, this amount is about three times its permissible overdraft limit as stated in the Reserve Bank of Zimbabwe Act.
In September 2018, the Parliament Budget Office said the country’s sovereign debt of US$20 billion (estimate for 2018) was primarily driven by government’s deficit financing activities of running up the RBZ overdraft facility and the issuance of Treasury Bills.