IMF blames Gono

Financial News
April 19, 2009 By Fish Eagle © zimbabwemetro.com ⋅

The International Monetary Fund (IMF) has stoked the fires with a damning report blaming Reserve Bank of Zimbabwe governor Gideon Gono for single-handedly causing a staggering 14 percent slump in Zimbabwe’s real Gross Domestic Product (GDP) in 2008, heightening calls for the embattled central bank chief’s ouster.
The statement, issued by the Bretton Woods institution after a two-week Article IV mission in Zimbabwe last month, comes as principals of the inclusive government meet tomorrow to decisively decide Gono’s future at the helm of the central bank.
A meeting of the Government Executive Committee comprising President Mugabe his two deputies Joseph Msika and Joice Mujuru; and Prime Minister Morgan Tsvangirai and his two deputies Thokozani Khupe and Arthur Mutambara at State House on Thursday sidestepped the issue of Gono, deferring it tothe crucial April 20 meeting of the three principals to the inclusive government.
James Maridadi, the Prime Minister’s spokesman said that Thursday’s meeting of the Executive Committee, also known as the ‘Top 6,’ did not discuss any substantial issues as it was an inaugural meeting whose purpose was to set ground rules of a working relationship
“All outstanding issues will be discussed when the principals meet for their regular consultations on Monday,” Maridadi said.
The IMF reports that Gono was solely responsible for causing a record collapse in the economy last yearwhich saw the GDP fall dramatically to a cumulative 54 percent, a record nine-year high.
In layman terms, GDP is a measure of the output of a national economy. “Hyperinflation driven by the Reserve Bank of Zimbabwe’s quasi-fiscal activities,” said the IMF report, “and a further significant deteriroation in the business climate, contributed to an estimated 14 percent fall in real GDP in 2008, on top of the 40 percent cumulative decline during 2000-07.
Poverty and unemployment have risen sharply,” said the IMF report, calling for central bank reforms.As pressure on Gono has grown with the collapse of Zimbabwe’s economy, he has blamed banks, the stock exchange, black market currency dealers and insurance companies. As well as firing the bankers, he blacklisted 20 investment companies last October and froze their accounts.
He has also insisted that he was taking instructions from his principal, President Robert Mugabe, as he implemented policies that have wrecked Zimbabwe’s dramatic economic ruin.
Gono printed plenty of Zimbabwean dollars, which government took out of circulation last week for one year until industrial production has been boosted from its current 20 percent to about 60 percent.
Economists say Gono was solely responsible for the dramatic collapse of the Zimdollar by relentlessly printing money, as the country, mired in disease and hunger, inflation beyond calculation and political crisis, kept on spiraling downward. Extraordinary situations call for extraordinary measures, he said.
Gono told parliamentarians last month that he engaged in non-traditional roles of a central bank because of declining capital flows, droughts, declining capacity utilisation, limited fiscal resources, political polarisation, sanctions and a failure to access balance of payments support. “People forget what they legislated,” Gono said.
“You said to me, ‘Ita zvese zvese as long as takuti ita.’ (Do whatever as long as we have instructed you to do so). So that is what I have been doing. You don’t shoot the messenger.”
The IMF report however dismisses Gono’s explanation insisting he was responsible for compounding Zimbabwe’s crisis through quasi-fiscal activities that have seen the RBZ pump millions into financing newlyresettled black farmers, most of them Zanu (PF) supporters and who have failed to produce enough food to feed the starving nation.
Under his leadership, the Reserve Bank took on myriad tasks unrelated to central banking: buying government cars, supplying farm equipment and fertilizer, setting up and supplying “People’s Shops” to sell cheap goods, setting up foreign currency shops, supplying medicines to state hospitals, mobilizing rigs to drill bore holes for clean water in the cholera crisis and a biofuels project, to name a few.
For example, Gono provided foreign currency to purchase combine harvesters, tractors, motorcycles, generators and small farming implements that were handed for free to resettled farmers by Mugabe just before elections last March, in what analysts said was a clear attempt by the Zimbabwean leader, working in cahoots with Gono to curry favour with a disgruntled electorate.