HARARE – Members of Parliament’s Public Accounts Committee (PAC) yesterday took Reserve Bank of Zimbabwe (RBZ) governor John Mangudya to task over the rising public debt and the activities of a vehicle established by the apex bank in 2014 to manage non-performing loans (NPLs).
At yesterday’s PAC hearing that had to be adjourned to a later date, the PAC felt that the way the burgeoning national debt was accrued over the years violated the law. For the past three decades, Zimbabwe has incurred a huge debt that now weighs heavily on the country’s economy.
Much of it, according to critics, went into funding government’s insatiable appetite for consumptive spending. Statistics put the national debt at US$16,9 billion, of which the domestic debt accounts for US$9,5 billion while US$7,4 billion is foreign debt.
In the last two years alone, a significant portion of the domestic debt was incurred through Treasury Bills (TBs) which critics allege were issued outside the RBZ’s precincts. Yesterday, Mangudya was hauled over the coals for continuing to issue the Bills.
The PAC was also not amused by the fact that the RBZ and its parent ministry of Finance did not consult Parliament before assuming external debts that included US$641 million from the Cairo-based Africa Export-Import Bank (Afreximbank); US$152 million from PTA Bank and US$25 million from Bank of Mozambique, among others.
“We, as a committee, are concerned with the issue of compliance and we would like to establish — as a matter of fact — that there was non-compliance which is why we want a breakdown of each year…,” thundered the committee chair, Tendai Biti.
“Our problem is there has been so much non-compliance with the Constitution, people not bothering to come to Parliament thus disrespecting this Parliament…,” he added.
In response, Mangudya said the RBZ Act gives the central bank relief from consulting Parliament.
The committee had also queried why the central bank had allowed government to borrow from it beyond the 20 percent statutory requirement through its overdraft facility. While Mangudya acknowledged the anomaly, amid pledges by the Finance minister Mthuli Ncube to keep the borrowings below five percent, he also took the fight to the PAC by questioning Parliament’s logic in approving a national budget which cannot be funded from the existing revenues.
“Where would Members of Parliament and Senators think the money would come from…I’m just asking because we are all to blame for this,” he said. Mangudya had to clear the air over allegations that the central bank was using the public’s deposits to finance government expenditure, saying this was not the case.
“We used the investments in the bank and not deposits from people. These are service bonds which amount to $2,9 billion.
“The RBZ can borrow funds the way it sees fit and request the minister of Finance, that’s according to the current RBZ Act.
So all the loans that we have acquired from Afreximbank, PTA Bank have all ministerial consent and legal opinion from the Attorney General’s Office …,” he said, adding that the loans were “well-structured facilities”. The committee also claimed that the bond notes introduced by the RBZ in 2016 as an export incentive had failed dismally, daring Mangudya to resign since he had indicated that he would quit if the surrogate currency fails.
Mangudya insisted that the bond notes were a success.
“For starters, people always want to put words into my mouth and I (want to) say this under oath; if the bond notes (as an export incentive scheme) fail to promote exports in this country I will resign,” he said.
He also revealed that Zimbabwe currently sits on US$500 million in foreign currency, enough to take the country for the next three to four weeks. The hearing essentially became a fishing expedition by the senior MDC official, Biti, who presided over the national purse between 2009 and 2013 when the unity government was liquidated,
While Mangudya rose to the occasion in fielding questions from the PAC, Biti, who has been using every forum presented to him to talk down Mangudya and government’s policies, was in a warring mood yesterday. He also grilled Mangudya over the Zimbabwe Asset Management Company (Zamco).
Zamco was set up in July 2014 as part of measures to deal with NPLs. Modelled along similar asset management companies in South Korea, Nigeria, Indonesia and Malaysia, the central bank had to give life to Zamco to prevent moral hazards in the banking sector where systemic vulnerabilities were quite rampant.
These NPLs were to be funded through long-term debt instruments approved by government. PAC members alleged, however, that Zamco was subjective in its acquisition of NPLs, and tended to favour political heavyweights. To the contrary, Mangudya said the vehicle mitigated a disaster that could have plunged the entire banking system and the country’s economy at large into chaos.
At the time, he argued that most companies had found themselves unable to service their loans due to a punitive interest rates regime that obtained when the country dollarised in 2009. “Zamco’s intervention was to make sure that companies become viable, secure and create employment, increase production,” he argued.
Thanks to the RBZ’s efforts, Mangudya revealed that NPLs have come down from a peak of 20 percent to eight percent.
Zamco has so far acquired 1 160 NPLs from banks valued at US$1,13 billion in the form of Treasury Bonds (Bonds), thus adding to the $6,3 domestic debt.
Mangudya said the beneficiaries have since repaid $360 million, leaving an outstanding amount of $770 million.
The committee pressed Zamco chief executive officer Cosmas Kanhai and Mangudya to disclose the names of individuals and companies that have benefited from the NPL relief.
Both declined saying they were bound by client confidentiality clauses not to disclose the names.
The PAC, however, insisted that Zamco was not a bank and that the borrowers housed in that vehicle no longer enjoyed the client-confidentiality clause.
The committee still wants Mangudya to disclose the names on his forthcoming appearance, including a breakdown of debts and TBs issued by government.