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Zimbabwe central bank operating illegally, says Biti

Wednesday May 20 2009


Zimbabwe’s central bank has been operating outside the law, a situation that has undermined and weakened the bankrupt country’s banking and financial systems Finance minister Tendai Biti has said.

Mr Biti made the comments after the arrival of an International Monetary Fund (IMF) team to review the operations of the Reserve Bank of Zimbabwe (RBZ), a necessary step before the international community starts extending support to the unity government.

“The RBZ has been operating outside the law,” Mr Biti said.

“Our challenge is to make the RBZ a credible institution consistent with best practices and the IMF teams terms of reference are centred on the credibility of the RBZ.”

President Robert Mugabe has also been embroiled in a fierce wrangle with his coalition partners over the reappointment of his loyalist Dr Gideon Gono as central bank governor.

Dr Gono is accused of fuelling Zimbabwe world record inflation by printing money and funding quasi-fiscal activities that propped up Mr Mugabe previous administration in the face of international isolation.

The IMF recently resumed technical assistance to Zimbabwe raising hopes that the international donors were warming up to the inclusive government formed by Mr Mugabe and his former arch rivals in February.

On Monday there were reports that the World Bank would make its grant available to the Zimbabwean government since 2001, signalling the institution was re-engaging Zimbabwe.

But a senior World Bank official said the US$22 million (Sh1.7billion) grant was not going through the government as the country was yet to demonstrate to the international community that it can manage the economy with transparency.

The Bretton Woods institutions have made it clear they would not resume balance-of-payments support to Zimbabwe until Harare clears outstanding arrears. Zimbabwe owes the IMF about US$133 million (Sh10.4billion).