IMF – ‘stealing money from a starving beggar’

HARARE - The International Monetary Fund (IMF) has re-iterated its position that Zimbabwe's economic crisis calls for urgent implementation of a comprehensive policy package comprising several mutually reinforcing actions. According to the report released after last week's visit, the IMF said su

ch actions included strong fiscal adjustment; full liberalization of the exchange rate regime for current account transactions; adoption of a strong monetary anchor; elimination of quasi-fiscal activity of the Reserve Bank of Zimbabwe and transparent absorption of these losses by the budget; and fundamental structural reform, including price deregulation, public enterprise reform, strengthening of property rights, and improvements in governance.

“In the absence of such a comprehensive and immediate policy package, Zimbabwe’s economic prospects would be bleak,” says the report. “Zimbabwe also needs to strengthen relations with the international community. The Fund staff stands ready to assist the authorities in designing an appropriate policy package, which would help achieve macroeconomic stability and growth and improve the welfare of the Zimbabwean people.

Inflation soared to about 900% just before the IMF team arrived and massive power cuts plagued the entire country during the team’s week-long visit. “The signs of economic collapse were unmistakeable,” said one analyst. “The question is, will the IMF keep providing Mugabe with more opportunities while the deterioration continues, or decide to put an end to its relationship with Zimbabwe?”

The IMF’s decision will reveal whether people or business lie at the core of its principles.

Andrea Bohnstead, an economics analyst for sub-Saharan Africa Global Insight, believes the IMF is caught between a rock and a hard place. “It is in no-one’s interest to end Zimbabwe’s membership, but it would also be detrimental to continue helping a country that refuses to make the fundamental policy reforms the institute has recommended. It is like stealing money from a starving beggar,” she said.

But a March deadline is looming which could see the country expelled from the IMF. Zimbabwe now owes nearly US$137-million after paying US$15-million just before the team arrived . Reports say US$16-million is due in the next two months. The importance of making IMF payments has been questioned by critics, who believe the money should be spent on more crucial necessities like fuel and food. But others believe expulsion could create even worse circumstances as businesses and donors withdraw, fearing instability and chaos.

The country has struggled with the payments, and Bohnstead said the source of funds used to meet a large instalment some months ago was in question. Some exporters’ accounts were allegedly raided, illegally.

Meanwhile Minister of Finance, Herbert Murerwa, has been quoted by the state-controlled media as boasting that the IMF had complimented the ‘smooth functioning of the country’s banking system’.

The Herald said the country had paid $184 million to the IMF over the last 12 months, reducing its arrears to $14.5 million. The privately-owned Financial Gazette said it had information that the team had demanded that Mugabe’s government honour a pledge to stop farm invasions which have crippled commercial agriculture.

But last week, central bank Governor Gideon Gono said the government had finally pledged to end the farm invasions by ruling party supporters. – SW Radio Africa/own correspondent

Post published in: Economy

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