THE Reserve Bank of Zimbabwe’s continued involvement in quasi-fiscal activities has become a major talking point for international financial institutions seeking to normalise relations with the debt-ridden southern African nation, The NewsHawks has established.
BERNARD MPOFU
At a time when President Emmerson Mnangagwa has gazetted a general notice exempting the Reserve Bank of Zimbabwe (RBZ) from complying with the Public Procurement and Disposal of Public Assets Act, the International Monetary Fund (IMF) says the central bank must desist from ruinous quasi-fiscal activities and stick to its “legal mandate”.
The International Monetary Fund (IMF) says the Reserve Bank of Zimbabwe must stop engaging in quasi-fiscal activities and focus on private sector growth to help economic recovery.
After completion of the 2024 Article IV Mission, a visiting IMF team said while Zimbabwe’s economy continues to show resilience in the face of currency instability and high inflation, the country needs more economic and political reforms to stimulate growth.
“Discussions covered policies to restore macroeconomic stability and improve growth prospects, focusing on addressing the sources of fiscal pressures including quasi-fiscal operations of the Reserve Bank of Zimbabwe, liberalising the foreign exchange market and establishing an effective framework for exchange rate and monetary policies; and progressing on reforms to improve economic governance and reduce corruption vulnerabilities,” the IMF says in a statement.
Quasi-fiscal activities are usually expenditures undertaken at a loss or below the usual rate of profit. Over the years, Zimbabwe’s central bank has been involved in such activities such as the farm mechanisation programme which should have been managed by Treasury.
In its latest economic update for Zimbabwe which was published last December, the World Bank blamed the central bank’s quasi-fiscal operations for driving inflation and volatility.
The multilateral lender said Zimbabwe should bring to an “end all quasi-fiscal operations (QFOs) and all unbudgeted expenditures” in order for policies in the Economic Reforms Matrix to re-establish macroeconomic stability, enhance growth and protect the most vulnerable.
Zimbabwe’s economy is facing difficulties as a looming drought and slow reform momentum have led to sluggish economic growth, analysts contend.
Analysts have already warned that shielding the RBZ and other state entities from scrutiny will open the door to looting and mismanagement.
The IMF says the RBZ Act should be amended to restrict the central bank to its core functions and eliminate quasi-fiscal operations which have contributed to economic turmoil.
The IMF also advised the Zimbabwean government to adopt “structural reforms aimed at improving the business climate, strengthening economic governance and reducing corruption vulnerabilities”.
The IMF team also said Zimbabwe’s sovereign wealth fund, which was recently renamed Mutapa Investment Fund, should be run in a transparent and accountable manner in accordance with international best practice on good corporate governance.
“The [IMF] mission encourages the authorities to ensure that the corporate governance arrangement, transparency and financial reporting, and accountability oversight of the recently established Mutapa fund are in line with international standards and good practices,” the IMF warned.
The Mutapa Investment Fund is already mired in controversy, with former finance minister Tendai Biti describing it as an unconstitutional capture of public funds.
Critics say Parliament is in the dark and has not used its oversight powers to demand answers, while dozens of state-owned enterprises have been warehoused under the Mutapa fund in a questionable arrangement described by some commentators as illegal.
