Gideon Gono to get his wings clipped?

HARARE - Zimbabwe's cabinet is said to have agreed to effect key amendments to the Reserve Bank of Zimbabwe (RBZ) Act, a development that will see the RBZ being confined to its core functions.

While the battle around the status of controversial RBZ governor Gideon Gono rages on, Finance Minister Tendai Biti is reported to have convinced cabinet on the need to clip the wings of the central bank chief, whose controversial quasi-fiscal policies are widely regarded as having ruined Zimbabwe's once buoyant economy.

President Robert Mugabe, who has declared he will not heed local or international calls for Gono to be replaced, chairs cabinet, which comprises all ministers from both Zanu-PF and the Movement for Democratic Change (MDC) parties.

"I am pleased to advise that cabinet has agreed on fundamental amendments to the Reserve Bank Act," Biti told journalists Thursday. "It is important that we restore the legitimacy, credibility and integrity of the Reserve Bank."

Biti said the RBZ reforms would ensure the bank was confined to its core business which involved the crafting of the monitory policy, supervising the banking sector and the management of the national payment systems, among other duties.

The MDC secretary-general said the envisaged amendments to the RBZ Act will also factor in recommendations by an International Monetary Fund (IMF) technical team that is in Zimbabwe to offer guidance in the banking system and central bank governance.

He said, "There would also be reforms around the board and the composition of the board.

"Most importantly the board will also play an oversight role of the bank. The board will ensure that there is compliance with the Act and various other Acts of the state.

"There will be issues around curtailment of the capacity of the bank to borrow. We have put in some restrictions there. "There will be provisions that will enforce the liquidation and rationalization of all none-core assets of the bank - companies like Home Link - so that the bank remains clean and legitimate."

Biti was confident the moves were bound to succeed saying nothing was going to distract his ministry from redressing the economy.Gono took over the reigns as central bank governor in December 2003 when inflation was still at around 600 percent. It ballooned to an estimated 500 billion percent by December last year, according to Biti.

Since the time, the RBZ was churning out loads of worthless local currency ostensibly to meet the demands of spiralling inflation while financing extravagant and often partisan government activities.

Biti said the advent of the multi-currency system early this year, coupled with a new fiscal culture by the new inclusive government, had reduced inflation to a monthly average of minus three percent. "Our biggest enemy as a ministry is politics," he said.

"There are things that we do not control, that we hope our principals and our leaders will resolve as a matter of urgency. All the outstanding issues in the Global Political Agreement we hope that they will resolve them.

"All the toxic issues around detentions, people that are being arrested, farm occupations we hope they will be resolved. If they can only help us in liquidating these things then we will be able to sprint.

Meanwhile Biti's law firm, Honey and Blanckenberg, has condemned Gono for what it described as an "unfortunate outburst against us" after he controversially accused its directors of externalization of funds and money-laundering.

In a letter purportedly written to Prime Minister Morgan Tsvangirai on May 11, Gono said Honey and Blanckenberg - where Finance Minister Tendai Biti was a partner - had stashed over US$1million outside the country in violation of exchange control regulations.

Gono said the law firm's externalization of foreign currency predated his appointment as Reserve Bank governor in 2003. He sought to use the allegations to buttress his claim that Biti's campaign to remove him from the RBZ was motivated by a personal vendetta.

New Zimbabwe.com reports that the law firm said in a statement: "Over the past few weeks (three years after the alleged offence), the partners of Honey and Blanckenberg have received a number of crude threats arising from these old accusations, stating that unless Tendai Biti, a former partner of the firm and currently Minister of Finance, desisted from his attempts to demand accountability from the governor of the Reserve Bank, the partners would face unspecified consequences. Naturally we have ignored such threats.

"Since Dr Gono states that this matter is before the courts, then it is clearly sub judice and it is regrettable and highly inappropriate that a person of his position has resorted to the media in an effort to bring this matter into the political arena without allowing the due process of the law to take its course.

"We are confident, however, in the sound judgment of the public its awareness of the integrity of Honey and Blanckenberg and its understanding of the reality of what lies behind Dr Gono's unfortunate outburst against us."

Gono's so-called letter to Tsvangirai was mysterious leaked to the media. Tsvangirai said last week that he never received the letter.If the Prime Minister never had sight of the letter allegedly dispatched to him by the governor of the Reserve Bank, while the document was splashed in various media outlets, it would be logical to assume the letter was leaked at source.