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Statement
by the IMF staff mission in Zimbabwe
International
Monetary Fund (IMF)
June 27,
2005
http://www.imf.org/external/np/sec/pr/2005/pr05151.htm
A staff mission
from the International Monetary Fund (IMF) visited Zimbabwe during
June 13-25, 2005 in the context of the 2005 Article IV Consultation
discussions and ahead of the Fund Executive Board's consideration
of the issue of Zimbabwe's compulsory withdrawal from the IMF.1
It made the following statement:
"We had cordial
meetings with Zimbabwe's economic team led by Finance Minister Herbert
Murerwa and Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono
and want to thank the authorities for facilitating our work. Our
discussions focused on policies to place Zimbabwe on a path to achieve
sustained growth, low inflation, and improving living standards.
Output is expected to decline sharply this year, in part due to
the continued difficulties in agriculture-which have been exacerbated
by drought-and the intensification of foreign exchange shortages.
"The mission
projects that, on the basis of present policies, the budget deficit
will increase markedly in 2005, partly due to the cost of higher
food imports, interest payments and higher pension costs. Together
with the RBZ's substantial producer and credit subsidies, these
deficits would fuel a sharp increase in money supply, and hence
inflation, by end-2005. The authorities indicated their desire to
address these problems by taking measures to contain further increases
in the budget deficit. The macroeconomic outlook is further clouded
by the gravity of the food security situation and implementation
of "Operation Restore Order," which threatens to worsen shortages,
contribute to lower growth, and aggravate inflation pressures.
"As indicated
in previous rounds of discussions, the mission stressed that the
magnitude of the economic problems confronting Zimbabwe calls for
a comprehensive policy package that should include decisive action
to lower the fiscal deficit, a tightening of monetary policy, and
steps to establish a unified, market-determined exchange rate. The
package should also include structural reforms, such as the removal
of administrative controls, to ease shortages and restore private
sector confidence.
"A rebuilding
of relations with the international community is a critical part
of the effort to reverse the economic decline. We hope the authorities
will work more closely with us to formulate and implement such a
policy package, which would help stabilize the economy and improve
the welfare of the Zimbabwean people."
1. As of June 20,
2005, Zimbabwe's arrears to the Fund amounted to SDR 201 million (US$295
million). Compulsory withdrawal is the last step in a series of escalating
measures that the IMF applies to members that fail to meet their obligations
under the Articles of Agreement. On February 16, 2005 the Executive
Board decided to defer for six months consideration of Zimbabwe's
compulsory withdrawal, providing the country with another chance to
strengthen cooperation with the Fund in terms of policies and payments.
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