Harare – Reserve Bank Governor, Dr John Mangudya has sensationally denied that the Central bank is involved in any quasi-fiscal activities, which is in direct variance to the Bank’s involvement in the financing of fuel, wheat and soya beans procurement among others over the recent past.

Quasi-fiscal activities are any activities undertaken by state-owned banks and enterprises, and sometimes by private sector companies at the direction of the government, where the prices charged are less than usual or less than the “market rate.”

A typical example would be state-owned enterprises providing fuel, electricity, or water at below market prices, thus providing an implicit price subsidy.

Appearing before the Public Accounts committee while giving evidence on Bond Notes, RTGS and debt contraction, Mangudya said that quasi fiscal activities do not exists anymore.

“We get very disappointed when people try to abuse the Central bank by using this type of language. They don’t exist anymore. They were taken by the government under DEBT assumption act,” he said.

“What the RBZ used to do when we were buying generators, tractors and bhakosi those are what we call quasi fiscal activities because those could have been done by the government but was done by the central bank.”

In the February 2019 Monetary Policy statement, Mangudya mentioned that the bank through the foreign currency allocation committee will continue to supply foreign currency for fuel, wheat, electricity and some other products.

The Public Accounts Chairman, Tendai Biti insisted that “in our view” these are quasi fiscal activities and the bank has no right to be involved, however the central bank governor dismissed the claim merely on definition of terms.

“They are essentially obligations of the central government and in a normal economy the market supplies that,” Biti said.

Mangudya said forex allocations are not quasi-fiscal. "We are only supplementing a stepchild so that it survives."

Over the past years the central bank has been accused of acting like a government ministry engaging in duties outside its mandate.

According to the Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU) analysis in 2018, financial sector distortions stemming from RBZ assuming roles prerogative of commercial banks and the private sector such as financing the productive sector brings distortions in the market as it competes with commercial banks and micro-finance institutions in providing funding to the productive sector.

During the 2019 Budget presentation, Finance Minister Mhuli Ncube mildy rebuked RBZ’s involvement in quasi fiscal activities as contributing to high budget contraints.

“All RBZ quasi fiscal activities which ended up imposing extra budgetary commitments worsening the financing gap are being discontinued. Forthwith, public expenditures will be confined to budgetary framework approved by parliament,” said Ncube.

-Equity Axis News