Gono under fire for giant debt

Reserve Bank of Zimbabwe governor Gideon Gono has defended the central bank's accumulation of a huge $1.131-billion debt during his tenure, saying it was meant to meet critical government requirements.

Gono’s defence is exposed in letters sent to Finance Minister Tendai Biti after the launch of the coalition government of Prime Minister Morgan Tsvangirai and President Robert Mugabe.

Gono and his adviser, Munyaradzi Kereke, wrote the letters, which were seen by Sunday Times this week, to Biti and his adviser, Conrad Nyamurova, when the finance minister demanded a detailed account of the central bank’s outstanding obligations.

Gono and Kereke claimed that the $1.131-billion debt incurred by the central bank at the height of Zimbabwe’s agonising economic crisis was directed towards meeting strategic payments such as agricultural inputs and power imports.

"As you will notice from the report, the entire $1.131-billion was on account of direct government-critical payments such as grain, fuel, electricity, agrochemicals, fertilisers as well as embassy payments," reads a letter dated April 8 last year. The central bank boss said subdued export performance since 2003 owing to a hard-hit agriculture sector resulted in Mugabe’s previous administration relying on external borrowing supplemented by foreign exchange borrowing from domestic sources.

"So dire has been the foreign exchange situation that at times government had to direct the Reserve Bank to ‘do everything possible’ to meet pressing requirements at short notice, which inevitably led to the usage of FCA resources belonging to various depositors," Gono wrote in the letter.

He said he also annexed funds belonging to gold and platinum producers and other exporters to meet government requirements.

In the letter to Biti, Gono went all out to defend himself against allegations of embezzling funds in "mischievous" media reports.

In his letter to Nyamurova, Kereke tried to defend the bank’s exploitation of depositors and exporters’ funds.

"These borrowings, which were done by the RBZ under the authority and in some case directives from government, were used for strategic payments on behalf of government. This essential fact is known to the ministry of finance," says the letter of April 20 2009.

Kereke accused Judith Madzorera, accountant-general in Biti’s office, of dishonesty when she professed ignorance of the accumulation of the $1.131- billion debt.

"We have exhaustive documentary evidence on the origins and make-up of the liabilities, complete with every TT (telegraphic transfer) showing how the money was used. Mrs Madzorera’s denial is, therefore, the height of intellectual and professional dishonesty as she presided at most of the meetings from which the borrowings arose or utilisation levels were discussed. As officials let us not misdirect ministers/principals through inaccurate briefs," Kereke said.

He said ministries and parastatals owed the central bank $1.131- billion extended to them during Gono’s reign. He warned that litigation mounted against the RBZ by creditors would ruin Zimbabwe’s "chances of securing new loans as a country" and recommended "amicable dialogue" with the creditors. The language and tone of the letters shows how the two once powerful men at the central bank have been humbled since Biti took over at the finance ministry, previously presided over by an appointee of Mugabe’s Zanu-PF.

Gono was accused of pumping resources into financing Mugabe’s populist activities through the central bank’s quasi-fiscal activities. A flood of litigation recently forced the government to take over the bank’s debt after creditors owed millions of dollars started auctioning its property.

At the height of the Gono-Biti clash in 2008, Biti made no secret of his desire to oust Gono from the bank, accusing him of ruining the economy. -Times Live