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Zimbabwe's Central Bank Technically Bankrupt As Liabilities Outstrip Assets, Say Economists

The bank’s problems started soon after it embarked on various programs which are said to have benefited the then Zanu PF government through printing of money to finance grassroots economic schemes, referred to as quasi-fiscal activities

The Reserve Bank of Zimbabwe is technically insolvent and is likely to collapse if the government does not recapitalize it, economists say.

The economists attribute the bank's current woes to the many programs it launched under the former government of President Robert Mugabe, often to the benefit of the former ruling ZANU-PF party and its supporters, funded by printing vast quantities of the now-abandoned Zimbabwean dollar.

Economist Nsununguli Mbongolwane told VOA that the bank was insolvent as its liabilities far outstrip its assets and it can no longer meet its obligations.

“The assets that the bank has, if any, are fewer than its liabilities and therefore it is technically insolvent and is likely to collapse,” he said.

But economist Eric Bloch of Bulawayo said that while the central bank could collapse if it were not recapitalized, it might have sufficient assets to cover its liabilities. He noted that the Reserve Bank owns three Harare buildings, one a 23-story office block, a large building in Bulawayo, the country's second city, a factory that produces gold jewelry, and a printing press and mint.

“It has extensive assets but it does not have cash," Bloch said. If government does not recapitalize it or enables it to obtain excess funds such as the special drawing rights from the International Monetary Fund then it will collapse."

The Ministry of Finance recently allocated the central bank US$10 million in the 2010 national budget to meet its operational costs, but most economists say this is far less than what would be needed to bail out the institution.

The Movement for Democratic Change formation of Prime Minister Morgan Tsvangirai has long called for the removal of RBZ Governor Gideon Gono, a close political ally of President Mugabe, saying he bears heavy responsibility for the country's precipitous economic collapse in the past decade.

Gono in his own defense has said that he followed instructions and did what was necessary to keep the economy running despite Western sanctions.