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No quick end to Harare, IMF quarrel
ZimOnline
December 05, 2006

http://www.zimonline.co.za/Article.aspx?ArticleId=577

HARARE - An International Monetary Fund (IMF) mission on Monday started consultation talks with the embattled government of President Robert Mugabe, with analysts saying the team would press for greater economic reforms but that there would be no quick resumption of financial support.

Zimbabweans are grappling with the country's worst economic crisis since independence in 1980, which is marked by hyperinflation, rocketing unemployment, a shrinking gross domestic product and shortages of foreign exchange, food and fuel.

The economy has shrunk by more than a third in the past seven years as the country suffers a deep recession exacerbated by the withdrawal of foreign aid over Mugabe's policies such as that of seizing land from whites to redistribute among blacks.

"The message (from IMF) will be that you will not get onto our programme if you do not change your policies," John Robertson, a leading private economic consultant told ZimOnline. "But the government has not done much that will see the IMF resuming a lending programme."

"We should take the Article Four report very seriously because it might prove unfavourable for us in the long term," Robertson added.

During its 10-day visit, the IMF team is expected to scrutinise the government's fiscal and monetary policies, with last week's 2007 national budget presented by Finance Minister Hebert Murerwa coming under review. Critics have dismissed the budget as a non-event.

Zimbabwe has on three occasions survived expulsion from the global lender. Last year the country made last minute payments to the critical General Resources Account, which it has since cleared.

The country now owes US$127 million as of end of October this year.

Analysts said Murerwa's pledge to halt quasi-fiscal spending by the Reserve Bank of Zimbabwe (RBZ) and a promise to stop relying on central bank loans were positive moves but that the IMF would call for even bolder reforms to save the economy from total meltdown.

The government's reliance on central bank funds has seen the RBZ printing money to sustain fiscal expenditure, a move that has pushed money supply growth and inflation into record territory.

The IMF and other key Western donors have urged the government to respect the rule of law and sanctity of private property rights, cut excess state expenditure, end price controls and to ease tough foreign exchange regulations seen driving a thriving black market for hard cash.

The Zimbabwe dollar is officially pegged at 250 to the United States dollar, a rate 10 times less than what is being offered on the black market.

Murerwa on Monday told international media that the government was unlikely to clear the remaining arrears with the Fund since it had no guarantees of having new aid or its voting rights restored.

This, despite Murerwa and Reserve Bank of Zimbabwe governor Gideon Gono having earlier promised the IMF that Harare would repay all it owed by the end of this month. Mugabe had also on February 19, 2006 during an interview with the national broadcaster, ZBC, said Zimbabwe would pay all its dues to get "the IMF off our back".

But Murerwa appeared to backtrack, saying the IMF had taken a political stance against Zimbabwe. "What help is it to us when we square up with the IMF and we do not get our voting rights back and any help?" he said in remarks that reflected Harare's disappointment with the Bretton Woods institution. He would not say when the arrears would be paid.

"Our view is that the majority shareholders of the IMF have taken a political standing when it comes to the Zimbabwe issue," Murerwa added. He however said the government would continue to engage the IMF.

Mugabe has previously branded the IMF a "political monster" and accuses Western powers of using their influence to deny Zimbabwe balance-of-payments support.

Harare says it is being punished for its controversial seizure of white-owned land for redistribution to landless blacks. - ZimOnline

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