IMF increases pressure

st=”on”>Washington for the second time in six months to decide formally the fate of Zimbabwe’s membership of the fund.

Although Zimbabwe still owes another US$120 million in arrears, it is likely to be given until November to find the money. The recent US$9 million payment averted immediate expulsion, but none of the IMF’s previous concerns and policy recommendations have been met by the Zimbabwe government in Harare. For the time being, the IMF executive board will shelve its frustrations and avoid recommending Zimbabwe’s expulsion for a cat’s cradle of political and economic reasons.

To achieve an IMF membership cancellation, the board needs an 85 per cent vote majority – a figure almost unachievable for a group containing many Third World countries that would be reluctant to support such drastic action against a state whose president, Robert Mugabe, has been a Third World hero for his struggle against colonial rule.

However, a cat and mouse game between Washington and Harare is sure to continue, with the IMF ratcheting up pressure on Zimbabwe to change its policies and repay its entire debt to the fund. The constant threat of expulsion is the only diplomatic avenue open to achieve policy changes in the country with the fastest declining economy in the world and where inflation is forecast to top 1,000 per cent before the end of the year.

Although Mugabe continues to rubbish the fund publicly at political rallies, Gideon Gono, governor of Zimbabwe’s Central Bank, has said repeatedly that Zimbabwe is committed to healing its troubled relationship with the IMF. And IMF pressure clearly worked because, after a seven-year gap, Zimbabwe began resuming payments of its debts in 2004.

However, the standoff will remain because, although Zimbabwe continues narrowly to avoid expulsion, there will be no resumption of new IMF loans unless there are drastic policy changes.

The IMF will still demand that Mugabe cuts state expenditure, opens the market and halts further invasions of commercial farmland. The IMF board will also demand, as it has always done in the past, that government reduces money supply and the civil service wage bill, which eats more than 20 per cent of the national budget. – IWPR