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Bill
to facilitate govt takeover of RBZ US$1bn debt
The Standard (Zimbabwe)
March 03, 2013
http://www.thestandard.co.zw/2013/03/03/bill-to-facilitate-govt-takeover-of-rbz-us1bn-debt/
Treasury and
the Reserve Bank of Zimbabwe (RBZ) have agreed on a draft bill that
will enable government to take over the central bank’s US$1,1
billion debt.
The takeover
of the debt is the last leg of reforms at RBZ that began in 2009,
when the central bank was ordered to stop engaging in quasi-fiscal
activities blamed for quickening Zimbabwe’s hyperinflation.
Hyperinflation
was halted by the use of multi-currencies four years ago.
Finance minister
Tendai Biti told Standardbusiness last week that he would soon take
the draft Debt Assumption Bill to Cabinet.
“The bill creates a Special Purpose Vehicle, where the RBZ
debt will be housed,” Biti said.
RBZ owes US$80,2
million in central bank lines of credit, has a non-resident sovereign
debt of US$452,6 million, non-resident institutional debt (US$110
million) and domestic debt (bank/deposits) of US$439 million.
The central
bank contends that it is also owed US$1,5 billion by government,
when it engaged in quasi-fiscal activities to finance critical needs
such as funding elections, sustaining parastatals and financing
the farm mechanisation exercise, among others.
The assumption
of the RBZ debt is a recommendation of the International Monetary
Fund (IMF), which argued that the bank’s balance sheet needed
to be freed of the debt.
In an Article
IV consultation report last year, IMF said the debt was constraining
the central bank’s ability to undertake liquidity provision
and distracts it from focusing on its core functions.
“Proposed modifications to the RBZ debt relief bill will focus
on transferring the liabilities from RBZ’s balance sheet to
a fund managed by the finance ministry,” IMF said.
“While
this is a less balanced approach than the comprehensive balance
sheet bifurcation [splitting] recommended by Fund TA (Technical
Assistance) missions, it remains consistent with the objective of
restructuring the RBZ balance sheet.”
The central
bank has also proposed to dispose of its non-core assets to help
clear some of its debts. However, the process has moved at a snail’s
pace, two years after the RBZ invited bids for the noncore assets.
In 2010, government
had to invoke the Presidential
Powers (Temporary Measures) Act, to protect the RBZ’s
assets from being attached by various creditors after obtaining
writs of executions.
The creditors
included those that supplied implements for the farm mechanisation
programme.
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