'Govt overburdened to assume RBZ debt'

HARARE - The Reserve Bank of Zimbabwe (RBZ) must liquidate non-core assets to pay off its debts, as government currently does not have capacity to assume it, analysts say.

They contend that government — expected to assume the central bank’s $1,1 billion debt, under an RBZ Debt Assumption Bill — is already heavily indebted.

“RBZ must liquidate its noncore assets like the big building they are operating from, their sports clubs plus the gold coins we hear about,” Cade Zvavanjanja, a local analyst with Greeyps Risk, Efficiency and Development Consultants, said at a Parliamentary committee on Finance and Economic Development hearing in Harare last week.

“They need to trim their employees to match the current situation,” he said, adding that “I’m sure when they were wrecking such a debt they had a plan B, what was the plan? I’m sure they had collateral. They should come clean and service their debt,” he said.

Among its debts, the RBZ has an institutional debt of $110 million, $80,2 million in central bank lines of credit, a sovereign debt of $452,6 million, and local debt of about $440 million.

Israel Mabhoo, a Zimbabwe Coalition on Debt Development board member, said government must first invest in a public debt audit before transferring the debt to poor Zimbabweans.

“In Zimbabwe, the poor always bear the brunt of government decisions, it is unfair for people who did not even benefit from these loans to be compelled to repay them.

“Let them conduct an audit, receipt those that benefitted and pursue them to service the debts because they are just a handful,” he said.

However, Nita Joshy, MBCA Bank’s legal department head, told the hearing, in her capacity as a Bankers Association of Zimbabwe (Baz) legal advisor, that government was “doing the right thing in assuming the debt”, but had to amend certain parts of the Bill.

“We are appreciative of this Bill as Baz, but have a problem with the fact that the Bill only gives immunity to the central bank and leaves out the banks,” Joshy said.

“Apart from that there is no uptake for Treasury Bills (TBs) on the market, as government has not made a clear commitment they will pay depositors when the bills mature,” she said, adding that “consequently, after the whole process we are weary of litigation because there is virtually no provision that grants immunity to banks in this Bill.”

The analysts also say that Zimbabweans could pay higher taxes if Parliament adopts the proposed Bill.

This comes as the government recently hiked taxes on fuel, airtime and basic foodstuffs.

They said government will have no option, but to hike taxes in order to raise funds to repay the RBZ debt.

“The current situation is that RBZ has no capacity to service bonds and although government has offered to assume the Central Bank debt, they are too broke to service these debts,” said Zvavanjanja.

“The only option of getting this money, apart from a free bailout package, would be to levy more taxes,” he said.

He, however, warned that “another tax hike would be impractical on government’s part as the country’s tax-gross domestic product (GDP) ratio is already too high according to the International Monetary Fund (IMF) stipulations”.

“According to the IMF, a country’s taxes must match its per capita.

Currently, the Zimbabwe tax to GDP ratio stands at about 49,3 percent and this is already too high,” Zvavanjanja said.

“The tax effort average must not be above 1,0 percent for a country with our level of per capita GDP while the Zimbabwean tax effort average is already above 1,5 percent,” he said, adding that “this is simply too high thus making it nearly impossible to introduce more taxes, but these people are unpredictable”.

Comments (2)

Israel Mabhoo said it very well. How can Zimbabweans who were excluded from Gono's largesse be expected to assume that debt? That is completely wrong.

speaker - 8 October 2014

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