Notice by John Robertson:
Having been appointed as Reserve Bank Governor for another five years, Dr Gono has presented an acceptance statement in which he commits himself to “ensuring continued financial sector stability through insightful surveillance and insistence for discipline and prudential risk management systems in the banking system”.
All who know Zimbabwe’s recent history will consider Dr Gono’s phrase "ensuring continued financial sector stability” to be an extraordinary flight of fancy, considering the degree of instability that has consumed Zimbabwe’s financial sector and the rest of the economy in the past five years.
However, his response to his appointment will be of interest to many, particularly those who might want to further explore Dr Gono’s claim that “all the Bank’s quasi-fiscal outlays since 1 December, 2003 have been fully amortized”, even though last week he admitted that the total had reached more than “Z$1 hexillion.
As the word “hexillion” does not appear in any of my dictionaries, I had to work to the 21 zeros offered in his explanations and discovered that our quasi-fiscal expenditures – spending that was not funded by the fiscus and therefore not funded by tax revenues – had exceeded a total of Z$1 sextillion in the five years since Dr Gono took office.
His claim that to settle this amount “there will be absolutely no penny to be transferred as a burden on the fiscus, and hence the tax payers” is actually not so surprising. Amortisation as a process is not involved. The money was not borrowed from anyone, so it does not have to be paid back to anyone. That much money didn’t even exist. But government needed it and it empowered the Reserve Bank Governor to simply bring it into existence.
And in exercising his powers, the Governor very effectively demolished Zimbabwe’s financial system. In the process, the country has also experienced the demolition of most of its productive capacity, most of its service sectors, a large part of its infrastructure, its dependability as a supplier of commodities and manufactured goods and its credibility as an investment or tourist destination.
Demolition also describes what has happened to Zimbabwe’s education and health sectors, to its vocational and technical training capacity, to the competence of local authorities and to the effectiveness of every one of government’s ministries too.
We’re now all too well aware that money that is not generated by the act of producing goods to buy will simply force up the prices of everything. More accurately, it will force down the value of all money, whether it was properly earned or merely printed. And now, in effect, the Reserve Bank Governor is proudly saying that by forcing the value of Z$1 sextillion to become virtually nil, this huge sum has become irrelevant and will therefore not be a burden on the taxpayer!
The taxpayers have already been crushed by the inevitable inflation, but for that achievement, Dr Gono has been rewarded with another five-year term. He has promised – before the end of the year – a “defining Monetary Policy Statement that will lay the solid framework and thrust of Monetary Policy over the next five years”.
We must all continue to hope for better things, but I regret to say that it is not yet safe to hold our breath while waiting for them!
I have attached the full text of Dr Gono’s statement. I hope you find more enlightenment in it than I did.
APPOINTMENT ACCEPTANCE STATEMENT BY
DR G. GONO GOVERNOR RESERVE BANK OF ZIMBABWE
26 NOVEMBER 2008
1. INTRODUCTION AND BACKGROUND
1.1 Pursuant to His Excellency, The President of the Republic of Zimbabwe, Cde R.G. Mugabe’s, in consultation with the Minister of Finance, decision and expression of confidence in me that I serve the Nation for another 5 years as Governor of the Reserve Bank of Zimbabwe, in terms of Section 14 of the Reserve Bank of Zimbabwe Act (Chapter 22:15), I wish to humbly accept this appointment and recall to National duty.
1.2 I deeply thank the Country’s Leadership for this continued faith in me.
1.3 Having served my first term of office since 1 December, 2003, I am all too aware of the limitations and setbacks that I met with over the past 5 years and I am determined, with the help of willing stakeholders, to overcome these setbacks, be they personal, institutional or economy-wide. Together we will make it.
2. VISION FOR THE NEXT 5 YEARS
2.1 At this juncture, the signals that I can give as guidance to our financial markets and to the economy in general are that the next 5 years must see full and successful turnaround of our economy.
2.2 Under this Vision, turnaround of the economy entails, us collectively ensuring that within the next 5 years, we secure an economy characterized by the following key factors, among several other imperatives:
4 (a) Low and stable single-digit inflation, anchoring a stable and predictable business environment as well as protecting the welfare of workers and the generality of Zimbabweans;
(b) Ensuring continued financial sector stability through insightful surveillance and insistence for discipline and prudential risk management systems in the banking system. Over the outlook, discipline will be the utmost driving principle, particularly in the banking sector;
(c) The economy being able to internally generate sufficient foreign exchange resources to meet its basic requirements in the productive and social sectors. This foreign exchange generative capacity will be anchored primarily on policies and programmes that hold high producer viability and export competitiveness;
(d) Re-instating Zimbabwe’s rightful place in regional and international money and capital markets through constructive engagement of creditors, supported by internal implementation of credible, comprehensive and consistent macroeconomic policies; and
(e) Anchoring Zimbabwe’s developmental programmes on the effective productive use of internal resources, particularly in the country’s extractive industries, led by mining.
2.3 Much the same way to some it may at first seem a far-fetched stretch of imagination to think of and plan for a hot summer when in the middle of a grueling winter, the above Vision for Zimbabwe is well within reach, notwithstanding our present difficult circumstances.
2.4 Yes, at current levels of above 200 million percent, Zimbabwe has the highest level of inflation in the world.
2.5 True, with barely 2 months import cover in foreign exchange reserves, the country has to press hard in generating foreign currency inflows.
2.6 To those who do not see beyond their noses; and to those who do not have faith in the power of dedicated intentions, our current circumstances may seem too daunting to overcome.
2.7 But as Governor, I have no doubt in my mind that a combination of comprehensive macroeconomic policies, discipline, a shared vision and hardwork all-round will see us achieving the outcome of a better and prosperous economy over the not too distant future. Together we will make it.
MONETARY POLICY STANCE
2.8 As I accept this extended call of National duty, I pledge to maintain a very tight monetary policy stance, anchored on the comprehensive realignment and streamlining of the Reserve Bank’s functions in a manner that leaves Monetary Authorities with the core responsibilities of inflation-targeting, management of the National payments systems and safeguarding financial sector stability.
2.9 With effect from January, 2009, therefore, the Reserve Bank will be focusing on the core businesses of inflation control and financial sector stability.
2.10 Under the new thrust, it would be expected that all our parastatals, local authorities and all Government Departments and Ministries will fully discharge their statutory mandates without the need to rely on the Central Bank for assistance.
2.11 By engaging in the various quasi-fiscal operation, we undertook over the past 5 years, these were extraordinary steps which were meant to address extraordinary circumstances and realities that were on the ground.
9 2.12 As such, the quasi-fiscal operations were deployed as survival interventions in the National interest.
2.13 Under the new thrust, the Reserve Bank will soon establish a stand alone, self-funding and well capitalized developmental institution that will manage all the work-in progress under the previous quasi-fiscal desks of the Bank, as well as meeting any other developmental programmes as they would arise in future, leaving the Bank with core functions.
2.14 I also wish to take this opportunity to once again re-affirm the Bank’s position and assurances to stakeholders that all the Bank’s quasi-fiscal outlays since 1 December, 2003 have been fully amortized such that there will be absolutely no penny to be transferred as a burden on the fiscus, and hence the tax payers.
2.15 This progressive position will be confirmed by the Bank’s External Auditors as part of their due- diligence on our financial records.
FOREIGN EXCHANGE MOBILIZATION
2.16 An honest assessment of what will take the economy off onto the recovery and growth path identifies foreign exchange availability as a key determinant factor that cannot be wished away.
2.17 For this reason, the outlook period will see unprecedented vigor in mobilizing foreign exchange through the strategic deployment of the country’s natural resources, as well as those parastatal assets and shareholdings that are amenable to private sector participation.
2.18 As a Nation, recognizing the devastating effects of sanctions against us, we must speak with one voice for their removal, whilst at the same time accepting the likelihood that such sanctions may be a phenomenon that may haunt us for a long time to come.
2.19 We must, therefore, work towards sweating of our internal assets, hoping that those imposing the sanctions will eventually allow the principles of objectivity, just, common sense and cordial humanity to prevail in the judgments of our internal situation.
2.20 I would like to also take this opportunity to thank my entire Team at the Reserve Bank, together with all the other stakeholders who stood firm on my side, especially during the multiple low moments I encountered over the past 5 years, all as part of discharging the statutory mandate I am honoured to be entrusted with.
2.21 In ending, I wish to give the Nation advance notice that before the end of December, 2008, a defining Monetary Policy Statement will be issued to lay the solid framework and thrust of Monetary Policy over the next 5 years.
2.22 To the Great People of Zimbabwe, I want to say thank you for the continued confidence in me.
2.23 I commit to serving the Nation selflessly, with enthusiasm, integrity, objectivity, economic patriotism and all this under the Zimbabwe First principle.
2.24 To those who differed and continue to differ with the Reserve Bank’s way of doing things, I wish to humbly reassure them that the Central Bank’s doors, the Governor’s doors in particular, are always open for stakeholders to air their strongly felt suggestions.
2.25 As Governor, I will listen to all views as they come in and assimilate constructive inputs into the policy pronouncements my Team and I will make.
14 2.26 Consistent with this open door policy, I hereby invite those in industry, agriculture, tourism, mining, services, the financial sector, employers’ representative bodies, labour bodies, consumer representatives, retailers, churches; interest groups and any other interested members of society to submit their contributions into the forthcoming Monetary Policy Statement by the 10th of December, 2008.
2.27 These inputs will be considered as part of our economic roadmap over the next 5 years.
DR G. GONO
GOVERNOR RESERVE BANK OF ZIMBABWE
26 November, 2008