mises
Joined: 05 Nov 2007
Location: retired
|
 Posted: Wed Oct 29, 2008 7:28 am Post subject: Mugabe allies use bank to siphon value |
 |
|
An interesting article:
| Quote: |
Foreign assets at the Reserve Bank of Zimbabwe are now so insignificant that one analyst describes them as equivalent to a "rounding error on the balance sheet".
Yet fortunes are being made even as the economy reaches an exponential stage of implosion.
Economists in Harare describe the process as the final stage in a redistribution programme that has robbed the poor to benefit the rich. The effect of hyperinflationary monetary policies pursued by Gideon Gono, the reserve bank governor, has been to suck residual value from the economy and channel it to securocrats, politicians and businessmen within President Robert Mugabe's circle, they say.
Access to patronage has become increasingly centralised at the bank, which has a hand in a lengthening list of trading activities from car sales to the distribution of fuel, seed maize, fertilizers and tractors, and controls access to foreign currency at a heavily discounted official rate.
"Monetary policy has become central to every business story. Those who have benefited from the crisis will want it to continue," says an analyst connected to the bank.
The process of wealth redistribution began with the expropriation of white-owned farms. It continued when the reserve bank seized control of pensions and corporate savings by raising statutory reserve requirements. Parallel exchange rate mechanisms have meanwhile offered instant riches to what one economist calls a "pickers' pot" of apparatchiks with access to hard currency at the discounted rate.
Conversely, price and exchange controls, as well as other restrictive laws governing business, are so difficult to comply with that the majority of Zimbabweans have to break the law to survive. "This means the authorities can haul you in whenever they decide to," says one Harare-based restaurant owner.
To circumvent strict rules on sending capital overseas, well-connected businessmen and officials buy up shares in Harare of Old Mutual, the insurance and investment management company, and sell them in London and Johannesburg, where they are co-listed. This process is also controlled by the bank.
Should Mr Mugabe lose control of the bank, as well as of the finance and other economic ministries, he would struggle to hold his support base. For this reason he and his principal allies have much to fear from the strings that foreign donors would attach to an economic rescue package.
"It would require decisions that are incompatible with the patronage system," says a senior economist at an international financial institution. |
http://www.ft.com/cms/s/0/50191768-a48e-11dd-8104-000077b07658.html?nclick_check=1 |
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
