Though Seen As Potential Mugabe Successor, Zimbabwe's Gono Burdened By Economy
The central bank chief has distanced himself from infighting and positioning to succeed President Mugabe, but he is also burdened by th
Meeting business leaders in Bulawayo on Friday in the wake of his monetary policy statement earlier in the week, Reserve Bank of Zimbabwe Governor Gideon Gono said some ruling party members want to drag him into their succession battles. Gono declared on Wednesday that he would not devalue the Zimbabwe dollar though its value on the parallel market has plunged to about Z$5,000 to the U.S. dollar while his bank has kept the official rate at Z$250 since a July currency overhaul. He also blamed the country's 1,281% inflation rate on runaway government spending. His comments on the struggle within the top ranks of the ZANU-PF party to succeed President Robert Mugabe further put some additional distance between Gono, seen as a potential presidential contender, and the apparatus of the ruling party. Economic observers add that Gono's policy statement isn’t likely to be of much help in Zimbabwe's relations with the International Monetary Fund. The board of the global lender of last resort will consider Zimbabwe’s membership status later this month. An IMF mission in Harare late last year was critical of the Reserve Bank's extensive financing of operations of government ministries and state enterprises. Such quasi-fiscal activities have meant printing large amounts of money, fueling inflation. An IMF analysis to be presented to the executive board says such quasi-fiscal funding accounts for 83% of total central bank assets - loans, in the language of bankers. Most of these loans to state-owned firms are unlikely ever to be repaid, leaving a huge hole in the central bank's balance sheet which Gono proposes to fill by shifting these doubtful loans to a new special-purpose RBZ subsidiary called Fiscorp, which will administer the loans and attempt to collect on them from borrowers. Experts say this is unlikely to impress the IMF board, particularly if the Reserve Bank continues to fund government overspending. There is also the issue of $127 million in debt arrears to the Fund, and the government's continuing disregard of IMF policy prescriptions - first and foremost its repeated urgings to rein in huge deficits. Chief Economist Prosper Chitambara of the Labor and Economic Development Research Institute in Harare predicts that IMF sanctions - suspension of Zimbabwe's membership and Fund borrowing privileges - will stay firmly in place for now.