Zimbabwe Central Bank Paid Out $971 Million Without Approvals

(Bloomberg) -- Zimbabwe’s central bank paid out $971 million without obtaining the necessary ministerial and parliamentary approvals, a parliamentary committee was told.

By issuing Treasury bills to cover the costs of its commitments the bank boosted money supply and weakened the national currency.

According to documents presented in parliament on Thursday the Reserve Bank of Zimbabwe agreed to pay $840 million for agricultural supplies under the government’s Command Agriculture program, which supports small scale farmers. It also paid $51 million to Malaysia Airlines Bhd. to lease three planes that the country never got to use and $80 million to recapitalize the state-owned Zimbabwe Consolidated Diamond Co.

“Mistakes were made,” said Kupukile Mlambo, deputy governor of the RBZ when he appeared before the Public Accounts Committee. In all instances, the bank has been authorized by the ministry of finance to issue Treasury Bills to cover the amounts owed by government, he said.

The Zimbabwe dollar, introduced in June, has plunged to about 15 per U.S. dollar after initially trading at 2.5 to the greenback. Prior to its introduction the country used a quasi currency known as bond notes and also permitted use of foreign currencies including the dollar.

Former Minister

The transactions were later approved by the then Finance Minister, Patrick Chinamasa, and the Treasury bills were issued between 2017 and this year, parliament was told.

The government converted $366 million owed to Sakunda Holdings, a politically connected company, into government bonds, the Financial Times reported earlier. Sakunda’s accounts were frozen by the central bank last week. No explanation has been given.

“There is elevated risk of value loss following the above mentioned liquidity injection,” Equity Axis, a company that analyzes the Zimbabwe currency market, said in a report. “Although several accounts have been frozen the anticipation of a blow up once the affected accounts are liberated is placing a huge premium on the Zim dollar.”

Committee chairman, Tendai Biti, accused the central bank of conducting quasi-fiscal activities and ignoring established rules of procurement by dealing directly with suppliers of goods and services instead of going through relevant ministries. Biti is an opposition leader and a former finance minister.

The International Monetary Fund on Thursday criticized the expansionary monetary policy stance of the government in a report.

--With assistance from Ray Ndlovu.

To contact the reporter on this story: Desmond Kumbuka in Harare at dkumbuka@bloomberg.net

To contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net, Antony Sguazzin, Andre Janse van Vuuren

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