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IMF suspends Zim expulsion
Freeman Razemba, The Herald (Zimbabwe)
July 08, 2004

The International Monetary Fund board of executive directors yesterday gave Zimbabwe another six months to consolidate its economic turnaround strategy before the issue of possible expulsion can be reopened.

The decision — seen as a thumbs-up to the turnaround strategy being spearheaded by Reserve Bank Governor Dr Gideon Gono — was reached after the country got a 65 percent vote from the board.

Dr Gono yesterday said this was a major breakthrough since the share of those in support of the country had improved from 3 percent at the end of last year.

"As monetary authorities, the verdict from the Fund comes as good news upon which greater efforts will be put to further consolidate the gains made so far," he said.

Dr Gono said the areas that the country would need to focus on during this window of opportunity include the speeded revival of the export sector to allow for faster convergence on the demand and supply situation in the foreign exchange market.

He said Zimbabwe now needed to broaden the scope of repayments to international creditors on the back of improving foreign exchange inflows, and cultivate supply response in the productive sectors so as to form a sound base for unification of interest rates in a declining inflation environment.

The country also needed to maintain fiscal rectitude to curb any unbudgeted expenditure for achievement of greater complementarity between fiscal and monetary policy frameworks.

There was also need for speeded revival of agricultural production to fortify food security and reduce pressure on the limited foreign exchange resources.

Dr Gono said the country also needed to shore up operational efficiencies in the parastatals so as to enhance private sector-public sector synergies as well as reduce the indirect burden on the fiscal budget often imposed by the parastatals.

Staying the course on progressive removal of structural rigidities as imposed by such distortions as price controls and incongruent marketing arrangements was another area that the country needed to focus on.

The IMF board met yesterday to consider possible expulsion of Zimbabwe from the Bretton Woods institution on the back of what the Fund had deemed as non-cooperation by the country.

The non-cooperation charge, which had gathered momentum at the close of 2003, was three-dimensional.

There were allegations that the country was not making enough efforts to pay up the long outstanding arrears to the IMF; that it was not implementing sound macroeconomic policies; and that there was not enough dialogue between the country and the Fund.

Dr Gono said as part of the re-engagement process, the turnaround strategy had to put emphasis on adoption of sound and responsive macro-economic policies, resume symbolic payments to the international community to whom the country owes money and reopen channels for dialogue.

"The re-engagement process had to also encompass direct presentations to the international community, the modest gains achieved to date under the turnaround programme, including improvement of foreign exchange inflows, reduction of inflation, resumption of repayments to the IMF, the World Bank and the ADB (African Development Bank), revival of general business confidence, and rekindling of the spirit of private-public sector co-operation," he said.

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